Amzn 2018-06-30 10-Q Filed

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-Q
____________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 000-22513
____________________________________
AMAZON.COM, INC.
(Exact name of registrant as specified in its charter)
____________________________________
Delaware 91-1646860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 Terry Avenue North, Seattle, Washington 98109-5210
(206) 266-1000
(Address and telephone number, including area code, of registrant’s principal executive offices)
____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer

Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No
487,741,189 shares of common stock, par value $0.01 per share, outstanding as of July 18, 2018
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AMAZON.COM, INC.
FORM 10-Q
For the Quarterly Period Ended June 30, 2018
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Statements of Cash Flows 3
Consolidated Statements of Operations 4
Consolidated Statements of Comprehensive Income 5
Consolidated Balance Sheets 6
Notes to Consolidated Financial Statements 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 33
Item 4. Controls and Procedures 34
PART II. OTHER INFORMATION

Item 1. Legal Proceedings 35
Item 1A. Risk Factors 35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 44
Item 3. Defaults Upon Senior Securities 44
Item 4. Mine Safety Disclosures 44
Item 5. Other Information 44
Item 6. Exhibits 45
Signatures 46
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended Six Months Ended Twelve Months Ended

June 30, June 30, June 30,
2017 2018 2017 2018 2017 2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH,
BEGINNING OF PERIOD $ 16,301 $ 17,616 $ 19,934 $ 21,856 $ 12,977 $ 13,851
OPERATING ACTIVITIES:
Net income 197 2,534 921 4,163 1,922 6,275
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of property and equipment, including internal-use
software and website development, and other amortization, including
capitalized content costs 2,633 3,630 5,068 7,301 9,448 13,711
Stock-based compensation 1,158 1,468 1,952 2,651 3,615 4,914
Other operating expense, net 60 85 102 141 164 240
Other expense (income), net (120) 110 (160) (75) (162) (207)
Deferred income taxes 376 (139) 354 3 (8) (380)
Changes in operating assets and liabilities:
Inventories (682) (1,090) 265 1,130 (1,874) (2,717)
Accounts receivable, net and other (1,221) (1,364) (257) (336) (2,925) (4,859)
Accounts payable 2,088 2,703 (4,777) (7,513) 5,046 4,364
Accrued expenses and other (252) (205) (1,657) (2,430) 1,039 (491)
Unearned revenue (387) (283) 419 623 1,537 943
Net cash provided by (used in) operating activities 3,850 7,449 2,230 5,658 17,802 21,793
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and
website development (3,113) (3,243) (5,261) (6,341) (9,763) (13,035)
Proceeds from property and equipment incentives 612 294 899 665 1,556 1,663
Acquisitions, net of cash acquired, and other (633) (866) (678) (879) (765) (14,173)
Sales and maturities of marketable securities 2,070 1,660 3,980 4,337 6,530 10,034
Purchases of marketable securities (4,210) (537) (5,564) (1,007) (10,731) (8,173)
Net cash provided by (used in) investing activities (5,274) (2,692) (6,624) (3,225) (13,173) (23,684)
FINANCING ACTIVITIES:
Proceeds from long-term debt and other 49 96 70 221 612 16,380
Repayments of long-term debt and other (48) (149) (88) (351) (170) (1,564)
Principal repayments of capital lease obligations (1,228) (1,284) (2,060) (3,297) (4,003) (6,037)
Principal repayments of finance lease obligations (47) (57) (85) (129) (170) (244)
Net cash provided by (used in) financing activities (1,274) (1,394) (2,163) (3,556) (3,731) 8,535
Foreign currency effect on cash, cash equivalents, and restricted cash 248 (443) 474 (197) (24) 41
Net increase (decrease) in cash, cash equivalents, and restricted cash (2,450) 2,920 (6,083) (1,320) 874 6,685
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF
PERIOD $ 13,851 $ 20,536 $ 13,851 $ 20,536 $ 13,851 $ 20,536
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt $ 146 $ 168 $ 150 $ 450 $ 295 $ 628
Cash paid for interest on capital and finance lease obligations 62 125 123 254 234 449
Cash paid for income taxes, net of refunds 447 300 693 813 879 1,077
Property and equipment acquired under capital leases 2,724 2,335 4,612 4,605 8,019 9,631
Property and equipment acquired under build-to-suit leases 748 795 1,948 1,536 2,575 3,128
See accompanying notes to consolidated financial statements.
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AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended Six Months Ended

June 30, June 30,
2017 2018 2017 2018
Net product sales $ 24,745 $ 31,864 $ 48,479 $ 63,468
Net service sales 13,210 21,022 25,190 40,460
Total net sales 37,955 52,886 73,669 103,928
Operating expenses:
Cost of sales 23,451 30,632 45,891 61,367
Fulfillment 5,158 7,932 9,855 15,724
Marketing 2,229 2,901 4,150 5,600
Technology and content 5,549 7,247 10,363 14,006
General and administrative 874 1,111 1,669 2,177
Other operating expense, net 66 80 109 143
Total operating expenses 37,327 49,903 72,037 99,017
Operating income 628 2,983 1,632 4,911
Interest income 44 94 83 173
Interest expense (143) (343) (282) (673)
Other income (expense), net 137 (129) 185 109
Total non-operating income (expense) 38 (378) (14) (391)
Income before income taxes 666 2,605 1,618 4,520
Provision for income taxes (467) (74) (695) (361)
Equity-method investment activity, net of tax (2) 3 (2) 4
Net income $ 197 $ 2,534 $ 921 $ 4,163
Basic earnings per share $ 0.41 $ 5.21 $ 1.93 $ 8.58
Diluted earnings per share $ 0.40 $ 5.07 $ 1.87 $ 8.34
Weighted-average shares used in computation of earnings per
share:
Basic 479 486 478 485
Diluted 492 500 491 499
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AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)

June 30, June 30,
2017 2018 2017 2018
Net income $ 197 $ 2,534 $ 921 $ 4,163
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of
$(2), $(1), $(15), and $17 194 (466) 381 (411)
Net change in unrealized gains (losses) on available-for-
sale debt securities:
Unrealized gains (losses), net of tax of $3, $0, $2, and
$9 (6) 1 (8) (40)
Reclassification adjustment for losses (gains)
included in “Other income (expense), net,” net of tax
of $0, $0, $0, and $0 2 1 5 1
Net unrealized gains (losses) on available-for-
sale debt securities (4) 2 (3) (39)
Total other comprehensive income (loss) 190 (464) 378 (450)
Comprehensive income $ 387 $ 2,070 $ 1,299 $ 3,713
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AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
December 31, 2017 June 30, 2018

(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 20,522 $ 19,823
Marketable securities 10,464 7,227
Inventories 16,047 14,824
Accounts receivable, net and other 13,164 12,607
Total current assets 60,197 54,481
Property and equipment, net 48,866 54,768
Goodwill 13,350 13,944
Other assets 8,897 10,907
Total assets $ 131,310 $ 134,100
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 34,616 $ 27,657
Accrued expenses and other 18,170 17,140
Unearned revenue 5,097 6,004
Total current liabilities 57,883 50,801
Long-term debt 24,743 24,638
Other long-term liabilities 20,975 23,666
Commitments and contingencies (Note 3)
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 500
Issued and outstanding shares — none — —
Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 507 and 511
Outstanding shares — 484 and 487 5 5
Treasury stock, at cost (1,837) (1,837)
Additional paid-in capital 21,389 24,028
Accumulated other comprehensive loss (484) (934)
Retained earnings 8,636 13,733
Total stockholders’ equity 27,709 34,995
Total liabilities and stockholders’ equity $ 131,310 $ 134,100
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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 — ACCOUNTING POLICIES

Unaudited Interim Financial Information
We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are
unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a
fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating
results for the periods presented are not necessarily indicative of the results that may be expected for 2018 due to seasonal and
other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules
and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary
Data,” of our 2017 Annual Report on Form 10-K.
Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation, including the addition
of restricted cash to cash and cash equivalents on the consolidated statements of cash flows as a result of the adoption of new
accounting guidance.
Principles of Consolidation
The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and
those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in
India and China and that support our seller lending financing activities (collectively, the “Company”). Intercompany balances
and transactions between consolidated entities are eliminated. The financial results of Whole Foods Market, Inc. (“Whole
Foods Market”) have been included in our consolidated financial statements from the date of acquisition on August 28, 2017.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the
consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, income taxes,
commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates,
vendor funding, and inventory valuation. Actual results could differ materially from those estimates.
Earnings per Share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share
is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as
determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our
calculation of earnings per share as their inclusion would have an antidilutive effect.
The following table shows the calculation of diluted shares (in millions):
June 30, June 30,
2017 2018 2017 2018
Shares used in computation of basic earnings per share 479 486 478 485
Total dilutive effect of outstanding stock awards 13 14 13 14
Shares used in computation of diluted earnings per share 492 500 491 499
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Revenue
Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return
allowances, promotional discounts, and rebates. Revenue also excludes any amounts collected on behalf of third parties,
including sales and indirect taxes. In arrangements where we have multiple performance obligations, the transaction price is
allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone
selling prices based on the prices charged to customers or using expected cost plus a margin.
A description of our principal revenue generating activities is as follows:
Retail sales - We offer consumer products through our online and physical stores. Revenue is recognized when control of
the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.
Third-party seller services - We offer programs that enable sellers to sell their products on our websites and their own
branded websites, and fulfill orders through us. We are not the seller of record in these transactions. The commissions and any
related fulfillment and shipping fees we earn from these arrangements are recognized as the services are rendered.
Subscription services - Our subscription sales include fees associated with Amazon Prime memberships and access to
content including audiobooks, e-books, digital video, digital music, and other non-AWS subscription services. Prime
memberships provide our customers with access to an evolving suite of benefits that represent a single stand-ready obligation.
Subscriptions are paid for at the time of or in advance of delivering the services. Revenue from such arrangements is
recognized over the subscription period.
AWS - Our AWS sales arrangements include global sales of compute, storage, database, and other service offerings.
Revenue is allocated to the services provided based on stand-alone selling prices and is recognized as the services are rendered.
Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract
term.
Other - Other revenue primarily includes sales of advertising services and is recognized as the services are rendered.
Return Allowances
Return allowances, which reduce revenue and cost of sales, are estimated using historical experience. Liabilities for return
allowances are included in “Accrued expenses and other” and were $468 million and $355 million as of December 31, 2017
and June 30, 2018. Included in “Inventories” on our consolidated balance sheets are assets totaling $406 million and $287
million as of December 31, 2017 and June 30, 2018, for the rights to recover products from customers associated with our
liabilities for return allowances.
Cost of Sales
Cost of sales primarily consists of the purchase price of consumer products, digital media content costs, including video
and music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping
costs, including where we are the transportation service provider. Shipping costs to receive products from our suppliers are
included in our inventory, and recognized as cost of sales upon sale of products to our customers. Payment processing and
related transaction costs, including those associated with seller transactions, are classified in “Fulfillment” on our consolidated
statements of operations.
Vendor Agreements
We have agreements with our vendors to receive funds primarily for cooperative marketing efforts, promotions,
incentives, and volume rebates. We generally consider these amounts received from vendors to be a reduction of the prices we
pay for their goods, including property and equipment, or services, and are recorded as a reduction of the cost of inventory, cost
of services, or cost of property and equipment. Volume rebates typically depend on reaching minimum purchase thresholds. We
evaluate the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates
can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.
Accounts Receivable, Net and Other

Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to
customers, vendors, and sellers. As of December 31, 2017 and June 30, 2018, customer receivables, net, were $6.4 billion and
$6.9 billion, vendor receivables, net, were $2.6 billion and $2.2 billion, and seller receivables, net, were $692 million and $640
million. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers
primarily to procure inventory.
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We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred.
Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected
in accordance with the terms of the agreement. The allowance for doubtful accounts was $348 million and $403 million as of
December 31, 2017 and June 30, 2018.
Unearned Revenue
Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is
recognized over the service period. Unearned revenue primarily relates to prepayments of Amazon Prime memberships and
AWS services. Our total unearned revenue as of December 31, 2017 was $6.1 billion, of which $3.9 billion was recognized as
revenue during the six months ended June 30, 2018, including adjustments related to the new revenue recognition guidance.
Included in “Other long-term liabilities” on our consolidated balance sheets was $1.0 billion and $1.2 billion of unearned
revenue as of December 31, 2017 and June 30, 2018.
Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer
contracts for future services that have not yet been recognized in our financial statements. For contracts with original terms that
exceed one year, the amount of revenue not yet recognized was $16.0 billion as of June 30, 2018. The weighted average
remaining life of our long-term contracts is 3.5 years. However, the timing of revenue recognition is largely driven by customer
activity, some of which can extend beyond the original contractual term.
Accrued Expenses and Other

Included in “Accrued expenses and other” on our consolidated balance sheets are amounts primarily related to
unredeemed gift cards, customer liabilities, leases and asset retirement obligations, current debt, acquired digital media content,
and other operating expenses.
As of December 31, 2017 and June 30, 2018, our liabilities for unredeemed gift cards were $3.0 billion and $1.8 billion.
We reduce the liability for a gift card when redeemed by a customer. The portion of gift cards that we do not expect to be
redeemed is recognized based on customer usage patterns.
Accounting Pronouncements Recently Adopted

In May 2014, the FASB issued an Accounting Standards Update (“ASU”) amending revenue recognition guidance and
requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and
uncertainty of revenue and cash flows arising from contracts with customers. We adopted this ASU on January 1, 2018 for all
revenue contracts with our customers using the modified retrospective approach and increased retained earnings by
approximately $650 million. The adjustment primarily relates to the unredeemed portion of our gift cards, which are now
recognized over the expected customer usage period rather than waiting until gift cards expire or when the likelihood of
redemption becomes remote. We changed the recognition and classification of Amazon Prime memberships, which are now
accounted for as a single performance obligation and recognized ratably over the membership period as service sales.
Previously, Prime memberships were considered to be arrangements with multiple deliverables and were allocated among
product sales and service sales. Other changes relate primarily to the presentation of revenue. Certain advertising services are
now classified as revenue rather than a reduction in cost of sales, and sales of apps, in-app content, and certain digital media
content are presented on a net basis.
The impact of applying this ASU for the six months ended June 30, 2018 primarily resulted in a decrease in product sales
and an increase in service sales driven by a reclassification of Prime membership fees of approximately $1.7 billion, which are
now accounted for as a single performance obligation and recognized over the membership period. Service sales also increased
by approximately $1.2 billion for the six months ended June 30, 2018 due to the reclassification of certain advertising services
that were previously classified as a reduction of cost of sales.
In January 2016, the FASB issued an ASU that updates certain aspects of recognition, measurement, presentation, and
disclosure of financial instruments. Under this ASU, certain equity investments are measured at fair value with changes
recognized in net income. We adopted this ASU in Q1 2018 with no material impact to our consolidated financial statements.
In October 2016, the FASB issued an ASU amending the accounting for income taxes. The new guidance requires the
recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the
transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory
has been sold to a third party. We adopted this ASU in Q1 2018 with an increase of approximately $250 million to retained
earnings and deferred tax assets net of valuation allowances.
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In November 2016, the FASB issued an ASU amending the presentation of restricted cash within the consolidated
statements of cash flows. The new guidance requires that restricted cash be added to cash and cash equivalents on the
consolidated statements of cash flows. We adopted this ASU in Q1 2018 on a retrospective basis with the following impacts to
our consolidated statements of cash flows (in millions):
Three Months Ended June 30, 2017 Previously Reported Adjustments As Revised
Operating activities $ 3,829 $ 21 $ 3,850
Investing activities (5,051) (223) (5,274)
Financing activities (1,263) (11) (1,274)
Net change in cash, cash equivalents, and restricted cash $ (2,485) $ (213) $ (2,698)
Six Months Ended June 30, 2017 Previously Reported Adjustments As Revised
Operating activities $ 2,239 $ (9) $ 2,230
Investing activities (6,667) 43 (6,624)
Financing activities (2,177) 14 (2,163)
Net change in cash, cash equivalents, and restricted cash $ (6,605) $ 48 $ (6,557)
Twelve Months Ended June 30, 2017 Previously Reported Adjustments As Revised
Operating activities $ 17,885 $ (83) $ 17,802
Investing activities (13,410) 237 (13,173)
Financing activities (3,769) 38 (3,731)
Net change in cash, cash equivalents, and restricted cash $ 706 $ 192 $ 898
Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued an ASU amending the accounting for leases. The new guidance requires the
recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently
recorded, on our consolidated balance sheets. Presentation of leases within the consolidated statements of operations and
consolidated statements of cash flows will be generally consistent with the current lease accounting guidance. The ASU is
effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We plan to adopt this ASU
beginning in Q1 2019. We are continuing to evaluate the impact and expect the ASU will have a material impact on our
consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.
Note 2 — CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND MARKETABLE SECURITIES

As of December 31, 2017 and June 30, 2018, our cash, cash equivalents, restricted cash, and marketable securities
primarily consisted of cash, U.S. and foreign government and agency securities, AAA-rated money market funds, and other
investment grade securities. Cash equivalents and marketable securities are recorded at fair value. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to
valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for
similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that
are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available
assumptions made by other market participants. These valuations require significant judgment.
We measure the fair value of money market funds and equity securities based on quoted prices in active markets for
identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive
markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by
observable market data. We did not hold any cash, cash equivalents, restricted cash, or marketable securities categorized as
Level 3 assets as of December 31, 2017 and June 30, 2018.
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The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable
securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):
December 31, 2017 June 30, 2018

Total Cost or Gross Gross Total
Estimated Amortized Unrealized Unrealized Estimated
Fair Value Cost Gains Losses Fair Value
Cash $ 9,982 $ 8,107 $ — $ — $ 8,107
Level 1 securities:
Money market funds 11,343 10,094 — — 10,094
Equity securities 53 25 83 — 108
Level 2 securities:
Foreign government and agency securities 620 389 — — 389
U.S. government and agency securities 4,823 5,465 1 (25) 5,441
Corporate debt securities 4,257 2,638 1 (18) 2,621
Asset-backed securities 905 756 — (8) 748
Other fixed income securities 338 225 — (2) 223
Equity securities — 29 6 — 35
$ 32,321 $ 27,728 $ 91 $ (53) $ 27,766
Less: Restricted cash, cash equivalents, and
marketable securities (1) (1,335) (716)
Total cash, cash equivalents, and marketable
securities $ 30,986 $ 27,050
___________________
(1) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as
collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters
of credit. We classify cash, cash equivalents, and marketable securities with use restrictions of less than twelve months as
“Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated
balance sheets. See “Note 3 — Commitments and Contingencies.”
The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed-
income securities as of June 30, 2018 (in millions):
Amortized Estimated
Cost Fair Value
Due within one year $ 16,023 $ 16,016
Due after one year through five years 2,895 2,864
Due after five years through ten years 216 212
Due after ten years 433 424
Total $ 19,567 $ 19,516
Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.
We also hold equity warrant assets giving us the right to acquire stock of other companies. As of December 31, 2017 and
June 30, 2018, these warrants had a fair value of $441 million and $577 million, and are recorded within “Other assets” on our
consolidated balance sheets. The related gain (loss) recorded in “Other income (expense), net” was $54 million and $40 million
in Q2 2017 and Q2 2018, and $69 million and $86 million for the six months ended June 30, 2017 and 2018. These assets are
primarily classified as Level 2 assets.
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The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within
the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in
millions):
December 31, 2017 June 30, 2018
Cash and cash equivalents $ 20,522 $ 19,823
Restricted cash included in accounts receivable, net and other 1,329 707
Restricted cash included in other assets 5 6
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of
cash flows $ 21,856 $ 20,536
Note 3 — COMMITMENTS AND CONTINGENCIES

Commitments
We have entered into non-cancellable operating, capital, and finance leases for equipment and office, fulfillment,
sortation, delivery, data center, physical store, and renewable energy facilities. Rental expense under operating lease agreements
was $439 million and $815 million for Q2 2017 and Q2 2018, and $850 million and $1.6 billion for the six months ended June
30, 2017 and 2018.
The following summarizes our principal contractual commitments, excluding open orders for purchases that support
normal operations and are generally cancellable, as of June 30, 2018 (in millions):
Six Months
Ended
December 31, Year Ended December 31,
2018 2019 2020 2021 2022 Thereafter Total

Debt principal and interest $ 480 $ 2,162 $ 2,086 $ 1,833 $ 2,049 $ 31,769 $ 40,379
Capital lease obligations, including interest (1) 3,503 6,191 4,022 1,212 520 673 16,121
Finance lease obligations, including interest (2) 246 512 523 532 542 4,326 6,681
Operating leases 1,503 2,727 2,609 2,286 2,221 12,325 23,671
Unconditional purchase obligations (3) 1,258 3,661 3,285 3,127 2,993 7,957 22,281
Other commitments (4) (5) 1,223 1,546 1,058 1,190 647 7,521 13,185
Total commitments $ 8,213 $16,799 $13,583 $10,180 $ 8,972 $ 64,571 $122,318
___________________
(1) Excluding interest, current capital lease obligations of $5.8 billion and $6.6 billion are recorded within “Accrued expenses
and other” as of December 31, 2017 and June 30, 2018, and $8.4 billion and $9.0 billion are recorded within “Other long-
term liabilities” as of December 31, 2017 and June 30, 2018.
(2) Excluding interest, current finance lease obligations of $282 million and $320 million are recorded within “Accrued
expenses and other” as of December 31, 2017 and June 30, 2018, and $4.7 billion and $5.2 billion are recorded within
“Other long-term liabilities” as of December 31, 2017 and June 30, 2018.
(3) Includes unconditional purchase obligations related to certain products offered in our Whole Foods Market stores and long-
term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets. For
those digital media content agreements with variable terms, we do not estimate the total obligation beyond any minimum
quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the
option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.
(4) Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit
lease arrangements and equipment lease arrangements that have not been placed in service and digital media content
liabilities associated with long-term digital media content assets with initial terms greater than one year.
(5) Excludes approximately $3.3 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate
of the amount and period of payment, if any.
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Pledged Assets
As of December 31, 2017 and June 30, 2018, we have pledged or otherwise restricted $1.4 billion and $803 million of
our cash, cash equivalents, and marketable securities, and certain property and equipment as collateral for real estate leases,
amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.
Other Contingencies
In 2016, we determined that we processed and delivered orders of consumer products for certain individuals and entities
located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act or other United States sanctions and
export control laws. The consumer products included books, music, other media, apparel, home and kitchen, health and beauty,
jewelry, office, consumer electronics, software, lawn and patio, grocery, and automotive products. Our review is ongoing and
we have voluntarily reported these orders to the United States Treasury Department’s Office of Foreign Assets Control and the
United States Department of Commerce’s Bureau of Industry and Security. We intend to cooperate fully with OFAC and BIS
with respect to their review, which may result in the imposition of penalties. For additional information, see Item 5 of Part II,
“Other Information — Disclosure Pursuant to Section 13(r) of the Exchange Act.”
We are subject to claims related to various indirect taxes (such as sales, value added, consumption, service, and similar
taxes), including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were
successfully to pursue these claims, we could be subject to significant additional tax liabilities. For example, in June 2017, the
State of South Carolina issued an assessment for uncollected sales and use taxes for the period from January 2016 to March
2016, including interest and penalties. South Carolina is alleging that we should have collected sales and use taxes on
transactions by our third-party sellers. We believe the assessment is without merit. If South Carolina or other states were
successfully to seek additional adjustments of a similar nature, we could be subject to significant additional tax liabilities. We
intend to defend ourselves vigorously in this matter.
Legal Proceedings
The Company is involved from time to time in claims, proceedings, and litigation, including the matters described in
Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies — Legal
Proceedings” of our 2017 Annual Report on Form 10-K and in Item 1 of Part I, “Financial Statements — Note 3 —
Commitments and Contingencies — Legal Proceedings” of our Quarterly Report on Form 10-Q for the period ended March 31,
2018 as supplemented by the following:
In March 2014, Kaavo, Inc. filed a complaint against Amazon.com, Inc. and Amazon Web Services, Inc. for patent
infringement in the United States District Court for the District of Delaware. The complaint alleges, among other things, that
Amazon Web Services’ Elastic Beanstalk and CloudFormation infringe U.S. Patent No. 8,271,974, entitled “Cloud Computing
Lifecycle Management For N-Tier Applications.” The complaint seeks injunctive relief, an unspecified amount of damages,
costs, and interest. In July 2015, Kaavo Inc. filed another complaint against Amazon.com, Inc. and Amazon Web Services, Inc.
in the United States District Court for the District of Delaware. The 2015 complaint alleges, among other things, that
CloudFormation infringes U.S. Patent No. 9,043,751, entitled “Methods And Devices For Managing A Cloud Computing
Environment.” The 2015 complaint seeks injunctive relief, an unspecified amount of damages, enhanced damages, attorneys’
fees, costs, and interest. In September 2017, the 2015 case was stayed pending resolution of a review petition we filed with the
United States Patent and Trademark Office. In June 2018, the court granted our motion for summary judgment in the 2014 case.
We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
In May 2018, Rensselaer Polytechnic Institute and CF Dynamic Advances LLC filed a complaint against Amazon.com,
Inc. in the United States District Court for the Northern District of New York. The complaint alleges, among other things, that
“Alexa Voice Software and Alexa enabled devices” infringe U.S. Patent No. 7,177,798, entitled “Natural Language Interface
Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, an unspecified amount of damages,
enhanced damages, an ongoing royalty, pre- and post-judgment interest, attorneys’ fees, and costs. We dispute the allegations of
wrongdoing and intend to defend ourselves vigorously in this matter.
In June 2018, VoIP-Pal.com, Inc. filed a complaint against Amazon Technologies, Inc. and Amazon.com, Inc. in the
United States District Court for the District of Nevada. The complaint alleges, among other things, that the Alexa calling and
messaging system, the Alexa app, and Echo, Tap, and Fire devices with Alexa support infringe U.S. Patent Nos. 9,537,762;
9,813,330; 9,826,002; and 9,948,549, all entitled “Producing Routing Messages For Voice Over IP Communications.” The
complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and interest. We dispute the
allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant
uncertainties, and could be material to our operating results and cash flows for a particular period. In addition, for the matters
disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is
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immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the
application of non-monetary remedies.
See also “Note 7 — Income Taxes.”
Note 4 — ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

2018 Acquisition Activity
On April 12, 2018, we acquired Ring Inc. (“Ring”) for cash consideration of approximately $853 million, net of cash
acquired, to expand our product and service offerings. During the six months ended June 30, 2018, we also acquired certain
other companies for an aggregate purchase price of $39 million. The primary reason for our other 2018 acquisitions was to
acquire technologies and know-how to enable Amazon to serve customers more effectively.
Acquisition-related costs were expensed as incurred and were not significant. Due to the limited amount of time since the
Ring acquisition, the valuation of certain assets and liabilities is preliminary and subject to change. The aggregate purchase
price of Ring and the other 2018 acquisitions was allocated as follows (in millions):
Purchase Price
Cash paid, net of cash acquired $ 865
Indemnification holdback 27
$ 892
Allocation
Goodwill $ 607
Intangible assets (1):
Marketing-related 141
Technology-based 165
Customer-related 140
446
Property and equipment 3
Deferred tax assets 106
Other assets acquired 254
Long-term debt (97)
Deferred tax liabilities (106)
Other liabilities assumed (321)
$ 892
___________________
(1) Acquired intangible assets have estimated useful lives of between two and seven years, with a weighted-average
amortization period of six years.
We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income approach.
These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating
expenses on a straight-line basis over their estimated useful lives.
Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the
aggregate, were not material to our consolidated results of operations.
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Goodwill
The goodwill of the acquired companies is primarily related to expected improvements in technology performance and
functionality, as well as sales growth from future product and service offerings and new customers, together with certain
intangible assets that do not qualify for separate recognition. The goodwill of acquired companies is generally not deductible
for tax purposes. The following summarizes our goodwill activity in the first six months of 2018 by segment (in millions):
North
America International AWS Consolidated
Goodwill - December 31, 2017 $ 11,165 $ 1,108 $ 1,077 $ 13,350
New acquisitions (1) 409 183 15 607
Other adjustments (2) (3) (3) (7) (13)
Goodwill - June 30, 2018 $ 11,571 $ 1,288 $ 1,085 $ 13,944
___________________
(1) Primarily includes the acquisition of Ring in the North America and International segments.
(2) Primarily includes changes in foreign exchange rates.
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Note 5 — DEBT
As of June 30, 2018, we had $24.3 billion of unsecured senior notes outstanding (the “Notes”). As of December 31, 2017
and June 30, 2018, the net unamortized discount and debt issuance costs on the Notes was $99 million and $101 million. We
also have other long-term debt with a carrying amount, including the current portion and borrowings under our credit facility,
of $692 million and $520 million as of December 31, 2017 and June 30, 2018. The face value of our total long-term debt
obligations is as follows (in millions):
December 31, 2017 June 30, 2018

2.600% Notes due on December 5, 2019 (2) 1,000 1,000
1.900% Notes due on August 21, 2020 (3) 1,000 1,000
2.500% Notes due on November 29, 2022 (1) 1,250 1,250
2.400% Notes due on February 22, 2023 (3) 1,000 1,000
Credit Facility 592 489
Other long-term debt 100 31
Total debt 24,942 24,770
Less current portion of long-term debt (100) (31)
Face value of long-term debt $ 24,842 $ 24,739
_____________________________
(1) Issued in November 2012, effective interest rate of the 2022 Notes was 2.66%.
(2) Issued in December 2014, effective interest rates of the 2019, 2021, 2024, 2034, and 2044 Notes were 2.73%, 3.43%,
3.90%, 4.92%, and 5.11%.
(3) Issued in August 2017, effective interest rates of the 2020, 2023, 2024, 2027, 2037, 2047, and 2057 Notes were 2.16%,
2.56%, 2.95%, 3.25%, 3.94%, 4.13%, and 4.33%.
(4) Consists of $872 million of 2025 Notes issued in December 2017 in exchange for notes assumed in connection with the
acquisition of Whole Foods Market and $128 million of 2025 Notes issued by Whole Foods Market that did not participate
in our December 2017 exchange offer. The effective interest rate of the 2025 Notes was 3.02%.
Interest on the Notes issued in 2012 is payable semi-annually in arrears in May and November. Interest on the Notes
issued in 2014 is payable semi-annually in arrears in June and December. Interest on the Notes issued in 2017 is payable semi-
annually in arrears in February and August. Interest on the 2025 Notes is payable semi-annually in arrears in June and
December. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are
not subject to any financial covenants under the Notes. The proceeds from the November 2012 and the December 2014 Notes
were used for general corporate purposes. The proceeds from the August 2017 Notes were used to fund the consideration for
the acquisition of Whole Foods Market, to repay notes due in 2017, and for general corporate purposes. The estimated fair
value of the Notes was approximately $25.7 billion and $24.2 billion as of December 31, 2017 and June 30, 2018, which is
based on quoted prices for our debt as of those dates.
In October 2016, we entered into a $500 million secured revolving credit facility with a lender that is secured by certain
seller receivables, which we subsequently increased to $600 million and may from time to time increase in the future subject to
lender approval (the “Credit Facility”). The Credit Facility is available for a term of three years, bears interest at the London
interbank offered rate (“LIBOR”) plus 1.65%, and has a commitment fee of 0.50% on the undrawn portion. There were $592
million and $489 million of borrowings outstanding under the Credit Facility as of December 31, 2017 and June 30, 2018, with
weighted-average interest rates of 2.7% and 2.9% as of December 31, 2017 and June 30, 2018. As of December 31, 2017 and
June 30, 2018, we have pledged $686 million and $576 million of our cash and seller receivables as collateral for debt related
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to our Credit Facility. The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its
carrying value as of December 31, 2017 and June 30, 2018.
The other debt, including the current portion, had a weighted-average interest rate of 5.8% and 4.3% as of December 31,
2017 and June 30, 2018. We used the net proceeds from the issuance of this debt primarily to fund certain business operations.
The estimated fair value of the other long-term debt, which is based on Level 2 inputs, approximated its carrying value as of
December 31, 2017 and June 30, 2018.
In April 2018, we established a commercial paper program (the “Commercial Paper Program”) under which we may from
time to time issue unsecured commercial paper up to a total of $7.0 billion at any time, with individual maturities that may vary
but will not exceed 397 days from the date of issue. There were no borrowings outstanding under the Commercial Paper
Program as of June 30, 2018.
In April 2018, in connection with our Commercial Paper Program, we amended and restated our unsecured revolving
credit facility (the “Credit Agreement”) with a syndicate of lenders to increase our borrowing capacity thereunder to $7.0
billion. As amended and restated, the Credit Agreement has a term of three years, but it may be extended for up to three
additional one-year terms if approved by the lenders. The interest rate applicable to outstanding balances under the amended
and restated Credit Agreement is LIBOR plus 0.50%, with a commitment fee of 0.04% on the undrawn portion of the credit
facility. There were no borrowings outstanding under the Credit Agreement as of December 31, 2017 and June 30, 2018.
Note 6 — STOCKHOLDERS’ EQUITY

Stock Repurchase Activity
In February 2016, the Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock,
with no fixed expiration. There were no repurchases of common stock during the six months ended June 30, 2017 or 2018.
Stock Award Activity
Common shares outstanding plus shares underlying outstanding stock awards totaled 504 million and 506 million as of
December 31, 2017 and June 30, 2018. These totals include all vested and unvested stock awards outstanding, including those
awards we estimate will be forfeited. Stock-based compensation expense is as follows (in millions):
June 30, June 30,
2017 2018 2017 2018
Cost of sales $ 12 $ 19 $ 21 $ 34
Fulfillment 261 320 425 564
Marketing 133 190 228 351
Technology and content 633 788 1,073 1,419
General and administrative 119 151 205 284
Total stock-based compensation expense $ 1,158 $ 1,468 $ 1,952 $ 2,652
The following table summarizes our restricted stock unit activity for the six months ended June 30, 2018 (in millions):
Weighted-Average
Grant-Date
Number of Units Fair Value
Outstanding as of December 31, 2017 20.1 $ 725
Units granted 3.7 1,437
Units vested (3.6) 552
Units forfeited (1.2) 808
Outstanding as of June 30, 2018 19.0 $ 891
Scheduled vesting for outstanding restricted stock units as of June 30, 2018, is as follows (in millions):
Six Months
Ended
December 31, Year Ended December 31,
2018 2019 2020 2021 2022 Thereafter Total

Scheduled vesting—restricted stock units 3.5 7.1 5.6 2.1 0.4 0.3 19.0
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As of June 30, 2018, there was $7.6 billion of net unrecognized compensation cost related to unvested stock-based
compensation arrangements. This compensation is recognized on an accelerated basis with approximately half of the
compensation expected to be expensed in the next twelve months, and has a weighted-average recognition period of 1.1 years.
The estimated forfeiture rate as of December 31, 2017 and June 30, 2018 was 28% and 27%. Changes in our estimates and
assumptions relating to forfeitures may cause us to realize material changes in stock-based compensation expense in the future.
Note 7 — INCOME TAXES

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective
tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our
estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation
due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of
jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do
business, acquisitions (including integrations) and investments, audit-related developments, changes in our stock price, changes
in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations,
case law, and administrative practices, principles, and interpretations related to tax, accounting, and other areas, including
European Union state aid rules, and relative changes of expenses or losses for which tax benefits are not recognized.
Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the
impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.
The 2017 Tax Act was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate
income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions,
imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and
changing how foreign earnings are subject to U.S. tax. The 2017 Tax Act also enhanced and extended through 2026 the option
to claim accelerated depreciation deductions on qualified property. We have not completed our determination of the accounting
implications of the 2017 Tax Act on our tax accruals. However, we reasonably estimated the effects of the 2017 Tax Act and
recorded provisional amounts in our financial statements as of December 31, 2017. We recorded a provisional tax benefit for
the impact of the 2017 Tax Act of approximately $789 million. This amount was primarily comprised of the remeasurement of
federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from
35%, after taking into account the mandatory one-time tax on the accumulated earnings of our foreign subsidiaries. The amount
of this one-time tax is not material. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and
interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may
make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes in the
period in which the adjustments are made.
For 2018, we estimate that our effective tax rate will be favorably affected by the impact of excess tax benefits from
stock-based compensation and the U.S. federal research and development credit and adversely affected by losses incurred in
certain foreign jurisdictions for which we may not realize a tax benefit. Losses for which we may not realize a related tax
benefit, primarily due to losses of foreign subsidiaries, reduce our pre-tax income without a corresponding reduction in our tax
expense, and therefore increase our effective tax rate. We record valuation allowances against the deferred tax assets associated
with losses for which we may not realize a related tax benefit.
Our income tax provision for the six months ended June 30, 2017 was $695 million, which included $197 million of net
discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation, partially offset by the
estimated impact of audit-related developments. Our income tax provision for the six months ended June 30, 2018 was $361
million, which included $964 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based
compensation.
Cash paid for income taxes, net of refunds was $447 million and $300 million in Q2 2017 and Q2 2018, and $693 million
and $813 million for the six months ended June 30, 2017 and 2018.
As of December 31, 2017 and June 30, 2018, tax contingencies were approximately $2.3 billion and $3.3 billion. We
expect the total amount of tax contingencies will grow in 2018. In addition, changes in state, federal, and foreign tax laws may
increase our tax contingencies. The timing of the resolution of income tax examinations is highly uncertain, and the amounts
ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is
reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly
reach resolution of income tax examinations in one or more jurisdictions. These assessments or settlements could result in
changes to our contingencies related to positions on tax filings on prior years’ tax filings.
We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for the calendar
year 2005 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or
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our net operating losses with respect to years under examination as well as subsequent periods. As previously disclosed, we
have received Notices of Proposed Adjustment (“NOPAs”) from the IRS for transactions undertaken in the 2005 and 2006
calendar years relating to transfer pricing with our foreign subsidiaries. The IRS is seeking to increase our U.S. taxable income
by an amount that would result in additional federal tax of approximately $1.5 billion, subject to interest. On March 23, 2017,
the U.S. Tax Court issued its decision regarding the issues raised in the IRS NOPAs. The Tax Court rejected the approach from
the IRS NOPAs in determining transfer pricing adjustments in 2005 and 2006 for the transactions undertaken with our foreign
subsidiaries and adopted, with adjustments, our suggested approach. In September 2017, the IRS appealed the decision to the
U.S. Court of Appeals for the Ninth Circuit. We will continue to defend ourselves vigorously in this matter. If the Tax Court
decision were reversed on appeal or if the IRS were to successfully assert transfer pricing adjustments of a similar nature to the
NOPAs for transactions in subsequent years, we could be subject to significant additional tax liabilities.
In October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax
authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European
Union rules on state aid. On October 4, 2017, the European Commission announced its decision that determinations by the tax
authorities in Luxembourg did not comply with European Union rules on state aid. Based on that decision the European
Commission announced an estimated recovery amount of approximately €250 million, plus interest, for the period May 2006
through June 2014, and ordered Luxembourg tax authorities to calculate the actual amount of additional taxes subject to
recovery. Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, that we
deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals. In December 2017, Luxembourg
appealed the European Commission’s decision. In May 2018, we appealed. We believe the European Commission’s decision to
be without merit and will continue to defend ourselves vigorously in this matter. We are also subject to taxation in various
states and other foreign jurisdictions including Canada, China, Germany, India, Japan, Luxembourg, and the United
Kingdom. We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in
respect of these particular jurisdictions primarily for 2008 and thereafter.
Note 8 — SEGMENT INFORMATION

We have organized our operations into three segments: North America, International, and AWS. We allocate to segment
results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative” based
on usage, which is generally reflected in the segment in which the costs are incurred. The majority of technology infrastructure
costs are allocated to the AWS segment based on usage. The majority of the remaining non-infrastructure technology costs are
incurred in the U.S. and are allocated to our North America segment. The results of Whole Foods Market are included in our
North America and International segments based on physical location. There are no internal revenue transactions between our
reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business
performance and manages its operations.
North America
The North America segment primarily consists of amounts earned from retail sales of consumer products (including from
sellers) and subscriptions through North America-focused websites and physical stores. This segment includes export sales
from these websites.
International
The International segment primarily consists of amounts earned from retail sales of consumer products (including from
sellers) and subscriptions through internationally-focused websites. This segment includes export sales from these
internationally-focused websites (including export sales from these sites to customers in the U.S., Mexico, and Canada), but
excludes export sales from our North America-focused websites.
AWS
The AWS segment consists of amounts earned from global sales of compute, storage, database, and other service
offerings for start-ups, enterprises, government agencies, and academic institutions.
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Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):
June 30, June 30,
2017 2018 2017 2018
North America
Net sales $ 22,370 $ 32,169 $ 43,362 $ 62,894
Operating expenses 21,934 30,334 42,330 59,910
Operating income $ 436 $ 1,835 $ 1,032 $ 2,984
International
Net sales $ 11,485 $ 14,612 $ 22,546 $ 29,487
Operating income (loss) $ (724) $ (494) $ (1,206) $ (1,116)
AWS
Net sales $ 4,100 $ 6,105 $ 7,761 $ 11,547
Operating income $ 916 $ 1,642 $ 1,806 $ 3,043
Consolidated
Net sales $ 37,955 $ 52,886 $ 73,669 $ 103,928
Operating income 628 2,983 1,632 4,911
Total non-operating income (expense) 38 (378) (14) (391)
Provision for income taxes (467) (74) (695) (361)
Equity-method investment activity, net of tax (2) 3 (2) 4
Net income $ 197 $ 2,534 $ 921 $ 4,163
Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in
millions):
June 30, June 30,
2017 2018 2017 2018
Net Sales:
Online stores (1) $ 23,754 $ 27,165 $ 46,580 $ 54,105
Physical stores (2) — 4,312 — 8,575
Third-party seller services (3) 6,991 9,702 13,429 18,966
Subscription services (4) 2,165 3,408 4,104 6,510
AWS 4,100 6,105 7,761 11,547
Other (5) 945 2,194 1,795 4,225
Consolidated $ 37,955 $ 52,886 $ 73,669 $ 103,928
____________________________
(1) Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to
offer a wide selection of consumable and durable goods that includes media products available in both a physical and
digital format, such as books, music, videos, games, and software. These product sales include digital products sold on a
transactional basis. Digital product subscriptions that provide unlimited viewing or usage rights are included in
Subscription services.
(2) Includes product sales where our customers physically select items in a store.
(3) Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.
(4) Includes annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video,
digital music, and other non-AWS subscription services.
(5) Primarily includes sales of advertising services, as well as sales related to our other service offerings.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance,
industry prospects, or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are
forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify
forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently
uncertain. Actual results could differ materially for a variety of reasons, including, among others, fluctuations in foreign
exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet,
online commerce, and cloud services, the amount that Amazon.com invests in new business opportunities and the timing of
those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared
with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in
operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment, sortation,
delivery, and data center optimization, risks of inventory management, seasonality, the degree to which we enter into, maintain,
and develop commercial agreements, proposed and completed acquisitions and strategic transactions, payments risks, and
risks of fulfillment throughput and productivity. In addition, the current global economic climate amplifies many of these risks.
These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly
from management’s expectations, are described in greater detail in Item 1A of Part II, “Risk Factors.”
For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Overview” of our 2017 Annual Report on Form 10-K.
Critical Accounting Judgments

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the
consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as
the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which
require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments
addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions
that are significant to understanding our results. For additional information, see Item 8 of Part II, “Financial Statements and
Supplementary Data — Note 1 — Description of Business and Accounting Policies,” of our 2017 Annual Report on Form 10-K
and Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies,” of this Form 10-Q. Although we believe that our
estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may
differ significantly from these estimates under different assumptions, judgments, or conditions.
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the first-in first-out method, and
are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently-
available information, about the likely method of disposition, such as through sales to individual customers, returns to product
vendors, or liquidations, and expected recoverable values of each disposition category. These assumptions about future
disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material
write-downs in the future. As a measure of sensitivity, for every 1% of additional inventory valuation allowance as of June 30,
2018, we would have recorded an additional cost of sales of approximately $160 million.
In addition, we enter into supplier commitments for certain electronic device components and certain products. These
commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs.
Income Taxes
We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations,
and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to
economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and
accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate
tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as intercompany
transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where
we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, the applicability
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of special tax regimes, losses incurred in jurisdictions for which we are not able to realize the related tax benefit, changes in
foreign currency exchange rates, entry into new businesses and geographies, changes to our existing businesses and operations,
acquisitions (including integrations) and investments and how they are financed, changes in our stock price, changes in our
deferred tax assets and liabilities and their valuation, and changes in the laws, regulations, administrative practices, principles,
and interpretations related to tax, accounting, and other areas, including European Union state aid rules. In addition, a number
of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, such as the recently enacted
U.S. tax reform legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Finally,
foreign governments may enact tax laws in response to the 2017 Tax Act that could result in further changes to global taxation
and materially affect our financial position and results of operations.
The 2017 Tax Act significantly changes how the U.S. taxes corporations. The 2017 Tax Act requires complex
computations to be performed that were not previously required in U.S. tax law, significant judgments to be made in
interpretation of the provisions of the 2017 Tax Act and significant estimates in calculations, and the preparation and analysis of
information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting
bodies could interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that
is different from our interpretation. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and
interpret any additional guidance, we may make adjustments to provisional amounts that we have recorded that may materially
impact our provision for income taxes in the period in which the adjustments are made.
We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax
liabilities against us. Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles,
and interpretations could have a material effect on our operating results or cash flows in the period or periods for which that
development occurs, as well as for prior and subsequent periods. Although we believe our tax estimates are reasonable, the
final outcome of tax audits, investigations, and any related litigation could be materially different from our historical income
tax provisions and accruals.
Recent Accounting Pronouncements

See Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies.”
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Liquidity and Capital Resources

Cash flow information, which reflects retrospective adjustments to our consolidated statements of cash flows as described
in Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies,” is as follows (in millions):
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
2017 2018 2017 2018 2017 2018
Cash provided by (used in):
Operating activities $ 3,850 $ 7,449 $ 2,230 $ 5,658 $ 17,802 $ 21,793
Investing activities (5,274) (2,692) (6,624) (3,225) (13,173) (23,684)
Financing activities (1,274) (1,394) (2,163) (3,556) (3,731) 8,535
Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and
marketable securities balances, which, at fair value, were $31.0 billion and $27.1 billion as of December 31, 2017 and June 30,
2018. Amounts held in foreign currencies were $11.1 billion and $7.9 billion as of December 31, 2017 and June 30, 2018, and
were primarily Euros, Japanese Yen, and British Pounds.
Cash provided by (used in) operating activities was $3.9 billion and $7.4 billion for Q2 2017 and Q2 2018, and $2.2
billion and $5.7 billion for the six months ended June 30, 2017 and 2018. Our operating cash flows result primarily from cash
received from our consumer, seller, developer, enterprise, and content creator customers, and advertising agreements, offset by
cash payments we make for products and services, employee compensation (less amounts capitalized related to internal-use
software that are reflected as cash used in investing activities), payment processing and related transaction costs, operating
leases, and interest payments on our long-term obligations. Cash received from our customers and other activities generally
corresponds to our net sales. Because consumers primarily use credit cards to buy from us, our receivables from consumers
settle quickly. The increase in operating cash flow for the trailing twelve months ended June 30, 2018, compared to the
comparable prior year period, was primarily due to the increase in net income, excluding non-cash charges such as
depreciation, amortization, and stock-based compensation. Cash provided by (used in) operating activities is also subject to
changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality,
inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and
fluctuations in foreign exchange rates.
Cash provided by (used in) investing activities corresponds with cash capital expenditures, including leasehold
improvements, internal-use software and website development costs, incentives received from property and equipment vendors,
intellectual property rights, and purchases, sales, and maturities of marketable securities. Cash provided by (used in) investing
activities was $(5.3) billion and $(2.7) billion for Q2 2017 and Q2 2018, and $(6.6) billion and $(3.2) billion for the six months
ended June 30, 2017 and 2018, with the variability caused primarily by our decision to purchase or lease property and
equipment, and purchases, maturities, and sales of marketable securities. Cash capital expenditures were $2.5 billion and $2.9
billion during Q2 2017 and Q2 2018, and $4.4 billion and $5.7 billion for the six months ended June 30, 2017 and 2018, which
primarily reflect additional capacity to support our fulfillment operations and additional investments in support of continued
business growth in technology infrastructure (the majority of which is to support AWS). Capital expenditures included $90
million and $58 million for internal-use software and website development during Q2 2017 and Q2 2018, and $164 million and
$118 million for the six months ended June 30, 2017 and 2018. Stock-based compensation capitalized for internal-use software
and website development costs does not affect cash flows. We made cash payments, net of acquired cash, related to acquisition
and other investment activity of $633 million and $866 million during Q2 2017 and Q2 2018, and $678 million and $879
million for the six months ended June 30, 2017 and 2018.
Cash provided by (used in) financing activities was $(1.3) billion and $(1.4) billion for Q2 2017 and Q2 2018, and $(2.2)
billion and $(3.6) billion for the six months ended June 30, 2017 and 2018. Cash outflows from financing activities result from
principal repayments on obligations related to capital leases and finance leases and repayments of long-term debt and other,
which were $1.3 billion and $1.5 billion in Q2 2017 and Q2 2018, and $2.2 billion and $3.8 billion for the six months ended
June 30, 2017 and 2018. Property and equipment acquired under capital leases was $2.7 billion and $2.3 billion during Q2 2017
and Q2 2018, and $4.6 billion for the six months ended June 30, 2017 and 2018, reflecting investments in support of continued
business growth primarily due to investments in technology infrastructure for AWS, which investments we expect to continue
over time. Cash inflows from financing activities primarily result from proceeds from long-term debt and other. Proceeds from
long-term debt and other were $49 million and $96 million in Q2 2017 and Q2 2018, and $70 million and $221 million for the
six months ended June 30, 2017 and 2018.
In April 2018, we established a commercial paper program (the “Commercial Paper Program”) under which we may from
time to time issue unsecured commercial paper up to a total of $7.0 billion at any time, with individual maturities that may vary
but will not exceed 397 days from the date of issue. There were no borrowings outstanding under the Commercial Paper
Program as of June 30, 2018.
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We had no borrowings outstanding under the Credit Agreement and $489 million of borrowings outstanding under our
Credit Facility as of June 30, 2018. See Item 1 of Part I, “Financial Statements — Note 5 — Debt” for additional information.
We recorded net tax provisions of $467 million and $74 million in Q2 2017 and Q2 2018, and $695 million and $361
million for the six months ended June 30, 2017 and 2018. The 2017 Tax Act includes a mandatory one-time tax on accumulated
earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had
been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, we intend to continue to
invest most or all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not
expect to incur any significant, additional taxes related to such amounts.
We have tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions that
are being utilized to reduce our U.S. taxable income. The 2017 Tax Act extended through 2026 and enhanced the option to
claim accelerated depreciation deductions on qualifying property. Cash taxes paid (net of refunds) were $447 million and $300
million for Q2 2017 and Q2 2018, and $693 million and $813 million for the six months ended June 30, 2017 and 2018. As of
December 31, 2017, our federal net operating loss carryforward was approximately $226 million and we had approximately
$855 million of federal tax credits potentially available to offset future tax liabilities. Our federal tax credits are primarily
related to the U.S. federal research and development credit. As we utilize our federal net operating losses and tax credits we
expect cash paid for taxes to increase. We endeavor to manage our global taxes on a cash basis, rather than on a financial
reporting basis. In connection with the European Commission’s October 2017 decision against us on state aid, Luxembourg
computed an initial recovery amount, consistent with the European Commission’s decision, of approximately €250 million, that
we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals.
Our liquidity is also affected by restricted cash balances that are pledged as collateral for real estate leases, amounts due
to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. To the extent we process payments for
third-party sellers or offer certain types of stored value to our customers, some jurisdictions may restrict our use of those funds.
These restrictions would result in the reclassification of a portion of our cash and cash equivalents from “Cash and cash
equivalents” to restricted cash, which is classified within “Accounts receivable, net and other” on our consolidated balance
sheets. As of December 31, 2017 and June 30, 2018, restricted cash, cash equivalents, and marketable securities were $1.3
billion and $716 million. See Item 1 of Part I, “Financial Statements — Note 3 — Commitments and Contingencies” for
additional discussion of our principal contractual commitments, as well as our pledged assets. Additionally, purchase
obligations and open purchase orders, consisting of inventory and significant non-inventory commitments, were $14.4 billion
as of June 30, 2018. These purchase obligations and open purchase orders are generally cancellable in full or in part through the
contractual provisions.
We believe that cash flows generated from operations and our cash, cash equivalents, and marketable securities balances,
as well as our borrowing arrangements, will be sufficient to meet our anticipated operating cash needs for at least the next 12
months. However, any projections of future cash needs and cash flows are subject to substantial uncertainty. See Item 1A of
Part II, “Risk Factors.” We continually evaluate opportunities to sell additional equity or debt securities, obtain credit facilities,
obtain capital, finance, and operating lease arrangements, repurchase common stock, pay dividends, or repurchase, refinance, or
otherwise restructure our debt for strategic reasons or to further strengthen our financial position.
The sale of additional equity or convertible debt securities would likely be dilutive to our shareholders. In addition, we
will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital
infrastructure, and technologies, which might affect our liquidity requirements or cause us to secure additional financing, or
issue additional equity or debt securities. There can be no assurance that additional credit lines or financing instruments will be
available in amounts or on terms acceptable to us, if at all.
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Results of Operations
We have organized our operations into three segments: North America, International, and AWS. Our results reflect the
operations of Whole Foods Market from the date of acquisition in August 2017. These segments reflect the way the Company
evaluates its business performance and manages its operations. See Item 1 of Part I, “Financial Statements — Note 8 — Segment
Information.”
Net Sales
Net sales include product and service sales. Product sales represent revenue from the sale of products and related shipping
fees and digital media content where we record revenue gross. Service sales primarily represent third-party seller fees earned
(including commissions) and related shipping fees, AWS sales, Amazon Prime membership fees, advertising services, and certain
digital content subscriptions. Net sales information is as follows (in millions):
June 30, June 30,
2017 2018 2017 2018
Net Sales:
North America $ 22,370 $ 32,169 $ 43,362 $ 62,894
International 11,485 14,612 22,546 29,487
AWS 4,100 6,105 7,761 11,547
Consolidated $ 37,955 $ 52,886 $ 73,669 $ 103,928
Year-over-year Percentage Growth:
North America 27% 44% 25% 45%
International 17 27 16 31
AWS 42 49 42 49
Consolidated 25 39 24 41
Year-over-year Percentage Growth, excluding the effect of foreign
exchange rates:
AWS 42 49 42 49
Consolidated 26 37 25 38
Net sales mix:
AWS 11 11 10 11
Consolidated 100% 100% 100% 100%
Sales increased 39% in Q2 2018 and 41% for the six months ended June 30, 2018, compared to the comparable prior year
periods. Changes in foreign currency exchange rates impacted net sales by $760 million for Q2 2018, and by $2.3 billion for the
six months ended June 30, 2018. For a discussion of the effect on sales growth of foreign exchange rates, see “Effect of Foreign
Exchange Rates” below.
North America sales increased 44% in Q2 2018 and 45% for the six months ended June 30, 2018, compared to the
comparable prior year periods. The sales growth primarily reflects increased unit sales, including sales by third-party sellers, and
the impact of the acquisition of Whole Foods Market. Increased unit sales were driven largely by our continued efforts to reduce
prices for our customers, including from our shipping offers, increased in-stock inventory availability, and increased selection.
International sales increased 27% in Q2 2018 and 31% for the six months ended June 30, 2018, compared to the comparable
prior year periods. The sales growth primarily reflects increased unit sales, including sales by third-party sellers. Increased unit
sales were driven largely by our continued efforts to reduce prices for our customers, including from our shipping offers, increased
in-stock inventory availability, and increased selection. Changes in foreign currency exchange rates impacted International net
sales by $727 million for Q2 2018, and by $2.2 billion for the six months ended June 30, 2018.
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AWS sales increased 49% in Q2 2018 and for the six months ended June 30, 2018, compared to the comparable prior year
periods. The sales growth primarily reflects increased customer usage, partially offset by pricing changes. Pricing changes were
driven largely by our continued efforts to reduce prices for our customers.
Operating Income (Loss)

Operating income (loss) by segment is as follows (in millions):
June 30, June 30,
2017 2018 2017 2018
Operating Income (Loss):
North America $ 436 $ 1,835 $ 1,032 $ 2,984
International (724) (494) (1,206) (1,116)
AWS 916 1,642 1,806 3,043
Consolidated $ 628 $ 2,983 $ 1,632 $ 4,911
Operating income increased from $628 million in Q2 2017 to $3.0 billion in Q2 2018, and increased from $1.6 billion for the
six months ended June 30, 2017, to $4.9 billion for the six months ended June 30, 2018. We believe that operating income is a
more meaningful measure than gross profit and gross margin due to the diversity of our product categories and services.
The increase in North America operating income in absolute dollars in Q2 2018 and for the six months ended June 30, 2018,
compared to the comparable prior year periods, is primarily due to increased unit sales, including sales by third-party sellers,
advertising sales, and slower growth in certain operating expenses, partially offset by costs to expand our fulfillment network.
The decrease in International operating loss in absolute dollars in Q2 2018 and for the six months ended June 30, 2018,
compared to the comparable prior year periods, is primarily due to increased unit sales, including sales by third-party sellers,
advertising sales, and slower growth in certain operating expenses, partially offset by costs to expand our fulfillment network.
Changes in foreign exchange rates impacted operating loss by $86 million for Q2 2018, and by $156 million for the six months
ended June 30, 2018.
The increase in AWS operating income in absolute dollars in Q2 2018 and for the six months ended June 30, 2018, compared
to the comparable prior year periods, is primarily due to increased customer usage and cost structure productivity, partially offset
by pricing changes and increased spending on technology infrastructure and payroll and related expenses, which was primarily
driven by additional investments to support the business growth. Changes in foreign exchange rates impacted operating income by
$(45) million for Q2 2018, and by $(134) million for the six months ended June 30, 2018.
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Operating Expenses
Information about operating expenses is as follows (in millions):
June 30, June 30,
2017 2018 2017 2018
Operating Expenses:
Cost of sales $ 23,451 $ 30,632 $ 45,891 $ 61,367
Fulfillment 5,158 7,932 9,855 15,724
Marketing 2,229 2,901 4,150 5,600
Technology and content 5,549 7,247 10,363 14,006
General and administrative 874 1,111 1,669 2,177
Total operating expenses $ 37,327 $ 49,903 $ 72,037 $ 99,017
Year-over-year Percentage Growth:
Cost of sales 22% 31% 21% 34%
Fulfillment 33 54 30 60
Marketing 44 30 39 35
Technology and content 43 31 40 35
General and administrative 51 27 55 30
Percent of Net Sales:
Cost of sales 61.8% 57.9% 62.3% 59.0%
Fulfillment 13.6 15.0 13.4 15.1
Marketing 5.9 5.5 5.6 5.4
Technology and content 14.6 13.7 14.1 13.5
General and administrative 2.3 2.1 2.3 2.1
Other operating expense, net 0.2 0.2 0.1 0.1
Cost of Sales
Cost of sales primarily consists of the purchase price of consumer products, digital media content costs where we record
revenue gross, including video and music, packaging supplies, sortation and delivery center and related equipment costs, and
inbound and outbound shipping costs, including where we are the transportation service provider.
The increase in cost of sales in absolute dollars in Q2 2018 and for the six months ended June 30, 2018, compared to the
comparable prior year periods, is primarily due to increased product and shipping costs resulting from increased sales.
Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale
of products to our customers. Shipping costs, which include sortation and delivery center and transportation costs, were $4.6
billion and $6.0 billion in Q2 2017 and Q2 2018, and $9.0 billion and $12.1 billion for the six months ended June 30, 2017 and
2018. We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an
increasing rate, we reduce shipping rates, we use more expensive shipping methods, and we offer additional services. We seek to
mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network,
negotiating better terms with our suppliers, and achieving better operating efficiencies. We believe that offering low prices to our
customers is fundamental to our future success, and one way we offer lower prices is through shipping offers.
Costs to operate our AWS segment are primarily classified as “Technology and content” as we leverage a shared
infrastructure that supports both our internal technology requirements and external sales to AWS customers.
Fulfillment
Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International
fulfillment centers, customer service centers, and physical stores and payment processing costs. While AWS payment processing
and related transaction costs are included in fulfillment, AWS costs are primarily classified as “Technology and content.”
Fulfillment costs as a percentage of net sales may vary due to several factors, such as payment processing and related transaction
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costs, our level of productivity and accuracy, changes in volume, size, and weight of units received and fulfilled, timing of
fulfillment network and physical store expansion, the extent we utilize fulfillment services provided by third parties, mix of
products and services sold, and our ability to affect customer service contacts per unit by implementing improvements in our
operations and enhancements to our customer self-service features. Additionally, because payment processing and fulfillment costs
associated with seller transactions are based on the gross purchase price of underlying transactions, and payment processing and
related transaction and fulfillment costs are higher as a percentage of sales versus our retail sales, sales by our sellers have higher
fulfillment costs as a percent of net sales.
The increase in fulfillment costs in absolute dollars in Q2 2018 and for the six months ended June 30, 2018, compared to the
comparable prior year periods, is primarily due to variable costs corresponding with increased product and service sales volume
and inventory levels, and costs from expanding our fulfillment network, which includes physical stores.
We seek to expand our fulfillment network to accommodate a greater selection and in-stock inventory levels and to meet
anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the fulfillment
services. We regularly evaluate our facility requirements.
Marketing
We direct customers to our websites primarily through a number of targeted online marketing channels, such as our
sponsored search, Associates program, social and online advertising, television advertising, and other initiatives. Our marketing
costs are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition
for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our
marketing costs.
The increase in marketing costs in absolute dollars in Q2 2018 and for the six months ended June 30, 2018, compared to the
comparable prior year periods, is primarily due to payroll and related expenses, as well as increased spending on online marketing
channels.
While costs associated with Amazon Prime memberships and other shipping offers are not included in marketing expense,
we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely.
Technology and Content

Technology and content costs include payroll and related expenses for employees involved in the research and development
of new and existing products and services, development, design, and maintenance of our websites, curation and display of products
and services made available on our websites, and infrastructure costs. Infrastructure costs include servers, networking equipment,
and data center related depreciation, rent, utilities, and other expenses necessary to support AWS, as well as these and other efforts.
Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers.
We seek to invest efficiently in numerous areas of technology and content so we may continue to enhance the customer
experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale.
Our technology and content investment and capital spending projects often support a variety of product and service offerings due
to geographic expansion and the cross-functionality of our systems and operations. We expect spending in technology and content
to increase over time as we continue to add employees and technology infrastructure. These costs are allocated to segments based
on usage. The increase in technology and content costs in absolute dollars in Q2 2018 and for the six months ended June 30, 2018,
compared to the comparable prior year periods, is primarily due to increased payroll and related costs associated with technical
teams responsible for expanding our existing products and services and initiatives to introduce new products and service offerings,
and an increase in spending on technology infrastructure. See Item 7 of Part II, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Overview” of our 2017 Annual Report on Form 10-K for a discussion of how
management views advances in technology and the importance of innovation.
During Q2 2017 and Q2 2018, we capitalized $111 million (including $20 million of stock-based compensation) and $75
million (including $17 million of stock-based compensation) of costs associated with internal-use software and website
development. For the six months ended June 30, 2017 and 2018, we capitalized $206 million (including $41 million of stock-based
compensation) and $148 million (including $30 million of stock-based compensation) of costs associated with internal-use
software and website development. Amortization of previously capitalized amounts was $145 million and $102 million for Q2
2017 and Q2 2018, and $296 million and $216 million for the six months ended June 30, 2017 and 2018.
General and Administrative

The increase in general and administrative costs in absolute dollars in Q2 2018 and for the six months ended June 30, 2018,
compared to the comparable prior year periods, is primarily due to increases in payroll and related expenses.
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Other Operating Expense, Net

Other operating expense, net was $66 million and $80 million for Q2 2017 and Q2 2018, and $109 million and $143 million
for the six months ended June 30, 2017 and 2018, and was primarily related to the amortization of intangible assets.
Interest Income and Expense

Our interest income was $44 million and $94 million during Q2 2017 and Q2 2018, and $83 million and $173 million for the
six months ended June 30, 2017 and 2018. We generally invest our excess cash in investment grade short- to intermediate-term
fixed income securities and AAA-rated money market funds. Our interest income corresponds with the average balance of invested
funds based on the prevailing rates, which vary depending on the geographies and currencies in which they are invested.
Interest expense was $143 million and $343 million during Q2 2017 and Q2 2018, and $282 million and $673 million for the
six months ended June 30, 2017 and 2018. The increase is primarily due to increases in our capital and finance lease arrangements
and long-term debt.
Other Income (Expense), Net

Other income (expense), net was $137 million and $(129) million during Q2 2017 and Q2 2018, and $185 million and $109
million for the six months ended June 30, 2017 and 2018. The primary component of other income (expense), net is related to
foreign currency and equity warrant valuation.
Income Taxes
Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax
rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of
the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation due
to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions
to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do business,
acquisitions (including integrations) and investments, audit-related developments, changes in our stock price, changes in our
deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and
administrative practices, principles, and interpretations related to tax, accounting, and other areas, including European Union state
aid rules, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate
can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-
deductible expenses on our effective tax rate is greater when our pre-tax income is lower.
The 2017 Tax Act was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate
income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions,
imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing
how foreign earnings are subject to U.S. tax. The 2017 Tax Act also enhanced and extended through 2026 the option to claim
accelerated depreciation deductions on qualified property. We have not completed our determination of the accounting implications
of the 2017 Tax Act on our tax accruals. However, we have reasonably estimated the effects of the 2017 Tax Act and recorded
provisional amounts in our financial statements as of December 31, 2017. We recorded a provisional tax benefit for the impact of
the 2017 Tax Act of approximately $789 million. This amount was primarily comprised of the remeasurement of federal net
deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%, after
taking into account the mandatory one-time tax on the accumulated earnings of our foreign subsidiaries. The amount of this one-
time tax is not material. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any
additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments
to the provisional amounts. Those adjustments may materially impact our provision for income taxes in the period in which the
adjustments are made.
For 2018, we estimate that our effective tax rate will be favorably affected by the impact of excess tax benefits from stock-
based compensation and the U.S. federal research and development credit and adversely affected by losses incurred in certain
foreign jurisdictions for which we may not realize a tax benefit. Losses for which we may not realize a related tax benefit,
primarily due to losses of foreign subsidiaries, reduce our pre-tax income without a corresponding reduction in our tax expense,
and therefore increase our effective tax rate. We record valuation allowances against the deferred tax assets associated with losses
for which we may not realize a related tax benefit.
Our income tax provision for the six months ended June 30, 2017 was $695 million, which included $197 million of net
discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation, partially offset by the estimated
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impact of audit-related developments. Our income tax provision for the six months ended June 30, 2018 was $361 million, which
included $964 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation.
Non-GAAP Financial Measures

Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other SEC regulations define and prescribe the
conditions for use of certain non-GAAP financial information. Our measures of free cash flows and the effect of foreign exchange
rates on our consolidated statements of operations meet the definition of non-GAAP financial measures.
We provide multiple measures of free cash flows because we believe these measures provide additional perspective on the
impact of acquiring property and equipment with cash and through capital and finance leases. As a result of the adoption of new
accounting guidance, we retrospectively adjusted our consolidated statements of cash flows to add restricted cash to cash and cash
equivalents. See Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies.”
Free Cash Flow

Free cash flow is cash flow from operations reduced by “Purchases of property and equipment, including internal-use
software and website development, net of proceeds from property and equipment incentives,” which both are included in cash flow
from investing activities. The following is a reconciliation of free cash flow to the most comparable GAAP cash flow measure,
“Net cash provided by (used in) operating activities,” for the trailing twelve months ended June 30, 2017 and 2018 (in millions):
Twelve Months Ended

June 30,
2017 2018
Net cash provided by (used in) operating activities $ 17,802 $ 21,793
Purchases of property and equipment, including internal-use software and website
development, net of proceeds from property and equipment incentives (8,207) (11,372)
Free cash flow $ 9,595 $ 10,421
Net cash provided by (used in) investing activities $ (13,173) $ (23,684)

Net cash provided by (used in) financing activities $ (3,731) $ 8,535
Free Cash Flow Less Lease Principal Repayments

Free cash flow less lease principal repayments is free cash flow reduced by “Principal repayments of capital lease
obligations,” and “Principal repayments of finance lease obligations,” which are included in cash flow from financing activities.
Free cash flow less lease principal repayments approximates the actual payments of cash for our capital and finance leases. The
following is a reconciliation of free cash flow less lease principal repayments to the most comparable GAAP cash flow measure,
“Net cash provided by (used in) operating activities,” for the trailing twelve months ended June 30, 2017 and 2018 (in millions):
Twelve Months Ended
June 30,
2017 2018
Principal repayments of capital lease obligations (4,003) (6,037)
Principal repayments of finance lease obligations (170) (244)
Free cash flow less lease principal repayments $ 5,422 $ 4,140

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Free Cash Flow Less Finance Lease Principal Repayments and Assets Acquired Under Capital Leases
Free cash flow less finance lease principal repayments and assets acquired under capital leases is free cash flow reduced by
“Principal repayments of finance lease obligations,” which is included in cash flow from financing activities, and property and
equipment acquired under capital leases. In this measure, property and equipment acquired under capital leases is reflected as if
these assets had been purchased with cash, which is not the case as these assets have been leased. The following is a reconciliation
of free cash flow less finance lease principal repayments and assets acquired under capital leases to the most comparable GAAP
cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended June 30, 2017 and
2018 (in millions):
Twelve Months Ended
June 30,
2017 2018
Property and equipment acquired under capital leases (8,019) (9,631)
Principal repayments of finance lease obligations (170) (244)
Free cash flow less finance lease principal repayments and assets acquired under capital leases $ 1,406 $ 546

All of these free cash flows measures have limitations as they omit certain components of the overall cash flow statement and
do not represent the residual cash flow available for discretionary expenditures. For example, these measures of free cash flows do
not incorporate the portion of payments representing principal reductions of debt or cash payments for business acquisitions.
Additionally, our mix of property and equipment acquisitions with cash or other financing options may change over time.
Therefore, we believe it is important to view free cash flows measures only as a complement to our entire consolidated statements
of cash flows.
Effect of Foreign Exchange Rates

Information regarding the effect of foreign exchange rates, versus the U.S. Dollar, on our net sales, operating expenses, and
operating income is provided to show reported period operating results had the foreign exchange rates remained the same as those
in effect in the comparable prior year periods. The effect on our net sales, operating expenses, and operating income from changes
in our foreign exchange rates versus the U.S. Dollar is as follows (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2017 2018 2017 2018
Exchange At Prior Exchange At Prior Exchange At Prior Exchange At Prior

As Rate Year As Rate Year As Rate Year As Rate Year
Reported Effect (1) Rates (2) Reported Effect (1) Rates (2) Reported Effect (1) Rates (2) Reported Effect (1) Rates (2)
Net sales $ 37,955 $ 502 $ 38,457 $ 52,886 $ (760) $ 52,126 $ 73,669 $ 994 $ 74,663 $ 103,928 $ (2,315) $ 101,613
Operating
expenses 37,327 464 37,791 49,903 (718) 49,185 72,037 925 72,962 99,017 (2,302) 96,715
Operating
income 628 38 666 2,983 (42) 2,941 1,632 69 1,701 4,911 (13) 4,898
___________________
(1) Represents the change in reported amounts resulting from changes in foreign exchange rates from those in effect in the
comparable prior year period for operating results.
(2) Represents the outcome that would have resulted had foreign exchange rates in the reported period been the same as those in
effect in the comparable prior year period for operating results.
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Guidance
We provided guidance on July 26, 2018, in our earnings release furnished on Form 8-K as set forth below. These forward-
looking statements reflect Amazon.com’s expectations as of July 26, 2018, and are subject to substantial uncertainty. Our results
are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates,
changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce,
and cloud services, as well as those outlined in Item 1A of Part II, “Risk Factors.”
Third Quarter 2018 Guidance
• Net sales are expected to be between $54.0 billion and $57.5 billion, or to grow between 23% and 31% compared
with third quarter 2017. This guidance anticipates an unfavorable impact of approximately 30 basis points from
foreign exchange rates.
• Operating income is expected to be between $1.4 billion and $2.4 billion, compared with $347 million in third
quarter 2017.
• This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or
legal settlements are concluded.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the
market values of our investments. Information relating to quantitative and qualitative disclosures about market risk is set forth
below and in Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Liquidity and Capital Resources.”
Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our long-term
debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial
statements. However, the fair value of our debt, which pays interest at a fixed rate, will generally fluctuate with movements of
interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. All of
our cash equivalent and marketable fixed income securities are designated as available-for-sale and, accordingly, are presented
at fair value on our consolidated balance sheets. We generally invest our excess cash in investment grade short- to intermediate-
term fixed income securities and AAA-rated money market funds. Fixed income securities may have their fair market value
adversely affected due to a rise in interest rates, and we may suffer losses in principal if forced to sell securities that have
declined in market value due to changes in interest rates.
Foreign Exchange Risk

During Q2 2018, net sales from our International segment accounted for 28% of our consolidated revenues. Net sales and
related expenses generated from our internationally-focused websites, and from www.amazon.ca and www.amazon.com.mx
(which are included in our North America segment), are primarily denominated in the functional currencies of the
corresponding websites and primarily include Euros, Japanese Yen, and British Pounds. The results of operations of, and certain
of our intercompany balances associated with, our internationally-focused websites and AWS are exposed to foreign exchange
rate fluctuations. Upon consolidation, as foreign exchange rates vary, net sales and other operating results may differ materially
from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. For
example, as a result of fluctuations in foreign exchange rates throughout the period compared to rates in effect the prior year,
International segment net sales in Q2 2018 increased by $727 million in comparison with Q2 2017.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable securities (“foreign
funds”). Based on the balance of foreign funds as of June 30, 2018, of $7.9 billion, an assumed 5%, 10%, and 20% adverse
change to foreign exchange would result in fair value declines of $395 million, $795 million, and $1.6 billion. All cash
equivalents and marketable fixed-income securities are classified as “available-for-sale.” Fluctuations in fair value are recorded
in “Accumulated other comprehensive loss,” a separate component of stockholders’ equity. Equity securities with readily
determinable fair values are included in “Marketable securities” on our consolidated balance sheets and are measured at fair
value with changes recognized in net income.
We have foreign exchange risk related to our intercompany balances denominated in various foreign currencies. Based on
the intercompany balances as of June 30, 2018, an assumed 5%, 10%, and 20% adverse change to foreign exchange would
result in losses of $240 million, $520 million, and $1.2 billion, recorded to “Other income (expense), net.”
See Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Results of Operations — Effect of Foreign Exchange Rates” for additional information on the effect on reported results of
changes in foreign exchange rates.
Investment Risk
As of June 30, 2018, our recorded value in equity and equity warrant investments in public and private companies was
$1.0 billion. Our equity and equity warrant investments in publicly traded companies represent $593 million of our investments
as of June 30, 2018, and are recorded at fair value, which is subject to market price volatility. We perform a qualitative
assessment for our equity and equity warrant investments in private companies to identify impairment. If this assessment
indicates that an impairment exists, we estimate the fair value of the investment and, if the fair value is less than carrying value,
we write down the investment to fair value. Our assessment includes a review of recent operating results and trends, recent
sales/acquisitions of the investee securities, and other publicly available data. The current global economic climate provides
additional uncertainty. Valuations of private companies are inherently more complex due to the lack of readily available market
data. As such, we believe that market sensitivities are not practicable.
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Item 4. Controls and Procedures
We carried out an evaluation required by the Securities Exchange Act of 1934 (the “1934 Act”), under the supervision
and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of the end of the period
covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed
by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time
periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
During the most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as
specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all
error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can
provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide
absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any,
within the Company have been detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Item 1 of Part I, “Financial Statements — Note 3 — Commitments and Contingencies — Legal Proceedings.”
Item 1A. Risk Factors
Please carefully consider the following risk factors. If any of the following risks occur, our business, financial condition,
operating results, and cash flows could be materially adversely affected. In addition, the current global economic climate
amplifies many of these risks.
We Face Intense Competition

Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries,
including physical, e-commerce, and omnichannel retail, e-commerce services, digital content and electronic devices, and web
and infrastructure computing services, and across geographies, including cross-border competition. Some of our current and
potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition, particularly
with our newly-launched products and services and in our newer geographic regions. They may secure better terms from
vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.
Competition may intensify, including with the development of new business models and the entry of new and well-
funded competitors, and as our competitors enter into business combinations or alliances and established companies in other
market segments expand to become competitive with our business. In addition, new and enhanced technologies, including
search, web and infrastructure computing services, digital content, and electronic devices, may increase our competition. The
Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.
Our Expansion Places a Significant Strain on our Management, Operational, Financial, and Other Resources
We are rapidly and significantly expanding our global operations, including increasing our product and service offerings
and scaling our infrastructure to support our retail and services businesses. This expansion increases the complexity of our
business and places significant strain on our management, personnel, operations, systems, technical performance, financial
resources, and internal financial control and reporting functions. We may not be able to manage growth effectively, which could
damage our reputation, limit our growth, and negatively affect our operating results.
Our Expansion into New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Business,
Legal, Financial, and Competitive Risks
We may have limited or no experience in our newer market segments, and our customers may not adopt our new
offerings. These offerings may present new and difficult technology challenges, and we may be subject to claims if customers
of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer
activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our
investments in them. If any of this were to occur, it could damage our reputation, limit our growth, and negatively affect our
operating results.
We May Experience Significant Fluctuations in Our Operating Results and Growth Rate
We may not be able to accurately forecast our growth rate. We base our expense levels and investment plans on sales
estimates. A significant portion of our expenses and investments is fixed, and we may not be able to adjust our spending
quickly enough if our sales are less than expected.
Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue and operating
profit growth depends on the continued growth of demand for the products and services offered by us or our sellers, and our
business is affected by general economic and business conditions worldwide. A softening of demand, whether caused by
changes in customer preferences or a weakening of the U.S. or global economies, may result in decreased revenue or growth.
Our sales and operating results will also fluctuate for many other reasons, including due to risks described elsewhere in
this section and the following:
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• our ability to retain and increase sales to existing customers, attract new customers, and satisfy our customers’
demands;
• our ability to retain and expand our network of sellers;
• our ability to offer products on favorable terms, manage inventory, and fulfill orders;
• the introduction of competitive stores, websites, products, services, price decreases, or improvements;
• changes in usage or adoption rates of the Internet, e-commerce, electronic devices, and web services, including
outside the U.S.;
• timing, effectiveness, and costs of expansion and upgrades of our systems and infrastructure;
• the success of our geographic, service, and product line expansions;
• the extent to which we finance, and the terms of any such financing for, our current operations and future growth;
• the outcomes of legal proceedings and claims, which may include significant monetary damages or injunctive relief
and could have a material adverse impact on our operating results;
• variations in the mix of products and services we sell;
• variations in our level of merchandise and vendor returns;
• the extent to which we offer free shipping, continue to reduce prices worldwide, and provide additional benefits to
our customers;
• the extent to which we invest in technology and content, fulfillment, and other expense categories;
• increases in the prices of fuel and gasoline, as well as increases in the prices of other energy products and
commodities like paper and packing supplies;
• the extent to which our equity-method investees record significant operating and non-operating items;
• the extent to which operators of the networks between our customers and our websites successfully charge fees to
grant our customers unimpaired and unconstrained access to our online services;
• our ability to collect amounts owed to us when they become due;
• the extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of
service attacks, data theft, computer intrusions, outages, and similar events; and
• terrorist attacks and armed hostilities.
Our International Operations Expose Us to a Number of Risks

Our international activities are significant to our revenues and profits, and we plan to further expand internationally. In
certain international market segments, we have relatively little operating experience and may not benefit from any first-to-
market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations and websites,
and promote our brand internationally. Our international operations may not be profitable on a sustained basis.
In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of
risks, including:
• local economic and political conditions;
• government regulation of e-commerce and other services, physical, e-commerce, and omnichannel retail, electronic
devices, and competition, and restrictive governmental actions (such as trade protection measures, including export
duties and quotas and custom duties and tariffs), nationalization, and restrictions on foreign ownership;
• restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products,
services, and content, including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal
precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media
products and enforcement of intellectual property rights;
• business licensing or certification requirements, such as for imports, exports, web services, and electronic devices;
• limitations on the repatriation and investment of funds and foreign currency exchange restrictions;
• limited fulfillment and technology infrastructure;
• shorter payable and longer receivable cycles and the resultant negative impact on cash flow;
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• laws and regulations regarding consumer and data protection, privacy, network security, encryption, payments, and
restrictions on pricing or discounts;
• lower levels of use of the Internet;
• lower levels of consumer spending and fewer opportunities for growth compared to the U.S.;
• lower levels of credit card usage and increased payment risk;
• difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural
differences;
• different employee/employer relationships and the existence of works councils and labor unions;
• compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting
corrupt payments to government officials and other third parties;
• laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and
• geopolitical events, including war and terrorism.
As international e-commerce and other online and web services grow, competition will intensify, including through
adoption of evolving business models such as omnichannel retail. Local companies may have a substantial competitive
advantage because of their greater understanding of, and focus on, the local customer, as well as their more established local
brand names. We may not be able to hire, train, retain, and manage required personnel, which may limit our international
growth.
The People’s Republic of China (“PRC”) and India regulate Amazon’s and its affiliates’ businesses and operations in
country through regulations and license requirements that may restrict (i) foreign investment in and operation of the Internet, IT
infrastructure, data centers, retail, delivery, and other sectors, (ii) Internet content, and (iii) the sale of media and other products
and services. For example, in order to meet local ownership and regulatory licensing requirements, www.amazon.cn is operated
by PRC companies that are indirectly owned, either wholly or partially, by PRC nationals. In addition, we provide certain
technology services in China in conjunction with third parties that hold PRC licenses to provide services. In India, the
government restricts the ownership or control of Indian companies by foreign entities involved in online multi-brand retail
trading activities. For www.amazon.in, we provide certain marketing tools and logistics services to third-party sellers to enable
them to sell online and deliver to customers, and we hold indirect minority interests in entities that are third-party sellers on the
www.amazon.in marketplace. Although we believe these structures and activities comply with existing laws, they involve
unique risks, and the PRC is actively considering changes in its foreign investment rules that could impact these structures and
activities. There are substantial uncertainties regarding the interpretation of PRC and Indian laws and regulations, and it is
possible that these governments will ultimately take a view contrary to ours. In addition, our Chinese and Indian businesses and
operations may be unable to continue to operate if we or our affiliates are unable to access sufficient funding or in China
enforce contractual relationships with respect to management and control of such businesses. If our international activities were
found to be in violation of any existing or future PRC, Indian or other laws or regulations or if interpretations of those laws and
regulations were to change, our businesses in those countries could be subject to fines and other financial penalties, have
licenses revoked, or be forced to shut down entirely.
If We Do Not Successfully Optimize and Operate Our Fulfillment Network and Data Centers, Our Business Could Be
Harmed
If we do not adequately predict customer demand or otherwise optimize and operate our fulfillment network and data
centers successfully, it could result in excess or insufficient fulfillment or data center capacity, or result in increased costs,
impairment charges, or both, or harm our business in other ways. As we continue to add fulfillment and data center capability
or add new businesses with different requirements, our fulfillment and data center networks become increasingly complex and
operating them becomes more challenging. There can be no assurance that we will be able to operate our networks effectively.
In addition, a failure to optimize inventory in our fulfillment network will increase our net shipping cost by requiring
long-zone or partial shipments. We and our co-sourcers may be unable to adequately staff our fulfillment network and customer
service centers. If the other businesses on whose behalf we perform inventory fulfillment services deliver product to our
fulfillment centers in excess of forecasts, we may be unable to secure sufficient storage space and may be unable to optimize
our fulfillment network.
We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. If
we are not able to negotiate acceptable terms with these companies or they experience performance problems or other
difficulties, it could negatively impact our operating results and customer experience. In addition, our ability to receive inbound
inventory efficiently and ship completed orders to customers also may be negatively affected by inclement weather, fire, flood,
power loss, earthquakes, labor disputes, acts of war or terrorism, acts of God, and similar factors.
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Under some of our commercial agreements, we maintain the inventory of other companies, thereby increasing the
complexity of tracking inventory and operating our fulfillment network. Our failure to properly handle such inventory or the
inability of these other companies to accurately forecast product demand would result in unexpected costs and other harm to
our business and reputation.
The Seasonality of Our Business Places Increased Strain on Our Operations

We expect a disproportionate amount of our net sales to occur during our fourth quarter. If we do not stock or restock
popular products in sufficient amounts such that we fail to meet customer demand, it could significantly affect our revenue and
our future growth. If we overstock products, we may be required to take significant inventory markdowns or write-offs and
incur commitment costs, which could reduce profitability. We may experience an increase in our net shipping cost due to
complimentary upgrades, split-shipments, and additional long-zone shipments necessary to ensure timely delivery for the
holiday season. If too many customers access our websites within a short period of time due to increased holiday demand, we
may experience system interruptions that make our websites unavailable or prevent us from efficiently fulfilling orders, which
may reduce the volume of goods we sell and the attractiveness of our products and services. In addition, we may be unable to
adequately staff our fulfillment network and customer service centers during these peak periods and delivery and other
fulfillment companies and customer service co-sourcers may be unable to meet the seasonal demand. We also face risks
described elsewhere in this Item 1A relating to fulfillment network optimization and inventory.
We generally have payment terms with our retail vendors that extend beyond the amount of time necessary to collect
proceeds from our consumer customers. As a result of holiday sales, as of December 31 of each year, our cash, cash
equivalents, and marketable securities balances typically reach their highest level (other than as a result of cash flows provided
by or used in investing and financing activities). This operating cycle results in a corresponding increase in accounts payable as
of December 31. Our accounts payable balance generally declines during the first three months of the year, resulting in a
corresponding decline in our cash, cash equivalents, and marketable securities balances.
Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Commercial Agreements,
Strategic Alliances, and Other Business Relationships
We provide e-commerce and other services to businesses through commercial agreements, strategic alliances, and
business relationships. Under these agreements, we provide web services, technology, fulfillment, computing, digital storage,
and other services, as well as enable sellers to offer products or services through our websites. These arrangements are complex
and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of
business we can service. We may not be able to implement, maintain, and develop the components of these commercial
relationships, which may include web services, fulfillment, customer service, inventory management, tax collection, payment
processing, hardware, content, and third-party software, and engaging third parties to perform services. The amount of
compensation we receive under certain of our commercial agreements is partially dependent on the volume of the other
company’s sales. Therefore, if the other company’s offering is not successful, the compensation we receive may be lower than
expected or the agreement may be terminated. Moreover, we may not be able to enter into additional commercial relationships
and strategic alliances on favorable terms. We also may be subject to claims from businesses to which we provide these
services if we are unsuccessful in implementing, maintaining, or developing these services.
As our agreements terminate, we may be unable to renew or replace these agreements on comparable terms, or at all. We
may in the future enter into amendments on less favorable terms or encounter parties that have difficulty meeting their
contractual obligations to us, which could adversely affect our operating results.
Our present and future e-commerce services agreements, other commercial agreements, and strategic alliances create
additional risks such as:
• disruption of our ongoing business, including loss of management focus on existing businesses;
• impairment of other relationships;
• variability in revenue and income from entering into, amending, or terminating such agreements or relationships; and
• difficulty integrating under the commercial agreements.
Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Acquisitions and
Investments
We have acquired and invested in a number of companies, and we may acquire or invest in or enter into joint ventures
with additional companies. These transactions (such as our acquisition of Whole Foods Market, Inc.) create risks such as:
• disruption of our ongoing business, including loss of management focus on existing businesses;
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• problems retaining key personnel;

• additional operating losses and expenses of the businesses we acquired or in which we invested;
• the potential impairment of tangible and intangible assets and goodwill, including as a result of acquisitions;
• the potential impairment of customer and other relationships of the company we acquired or in which we invested or
our own customers as a result of any integration of operations;
• the difficulty of completing such transactions and achieving anticipated benefits within expected timeframes, or at
all;
• the difficulty of incorporating acquired operations, technology, and rights into our offerings, and unanticipated
expenses related to such integration;
• the difficulty of integrating a new company’s accounting, financial reporting, management, information and
information security, human resource, and other administrative systems to permit effective management, and the lack
of control if such integration is delayed or not implemented;
• for investments in which an investee’s financial performance is incorporated into our financial results, either in full or
in part, the dependence on the investee’s accounting, financial reporting, and similar systems, controls, and
processes;
• the difficulty of implementing at companies we acquire the controls, procedures, and policies appropriate for a larger
public company;
• the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the
risks our other businesses face;
• potential unknown liabilities associated with a company we acquire or in which we invest; and
• for foreign transactions, additional risks related to the integration of operations across different cultures and
languages, and the economic, political, and regulatory risks associated with specific countries.
As a result of future acquisitions or mergers, we might need to issue additional equity securities, spend our cash, or incur
debt, contingent liabilities, or amortization expenses related to intangible assets, any of which could reduce our profitability and
harm our business or only be available on unfavorable terms, if at all. In addition, valuations supporting our acquisitions and
strategic investments could change rapidly given the current global economic climate. We could determine that such valuations
have experienced impairments or other-than-temporary declines in fair value which could adversely impact our financial
results.
We Have Foreign Exchange Risk

The results of operations of, and certain of our intercompany balances associated with, our international websites and
product and service offerings are exposed to foreign exchange rate fluctuations. Upon translation, operating results may differ
materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances.
As we have expanded our international operations, our exposure to exchange rate fluctuations has increased. We also hold cash
equivalents and/or marketable securities in foreign currencies including British Pounds, Euros, and Japanese Yen. If the
U.S. Dollar strengthens compared to these currencies, cash equivalents, and marketable securities balances, when translated,
may be materially less than expected and vice versa.
The Loss of Key Senior Management Personnel Could Negatively Affect Our Business
We depend on our senior management and other key personnel, particularly Jeffrey P. Bezos, our President, CEO, and
Chairman. We do not have “key person” life insurance policies. The loss of any of our executive officers or other key
employees could harm our business.
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We Could Be Harmed by Data Loss or Other Security Breaches

As a result of our services being web-based and the fact that we process, store, and transmit large amounts of data,
including personal information, for our customers, failure to prevent or mitigate data loss or other security breaches, including
breaches of our vendors’ technology and systems, could expose us or our customers to a risk of loss or misuse of such
information, adversely affect our operating results, result in litigation or potential liability for us, and otherwise harm our
business. We use third-party technology and systems for a variety of reasons, including, without limitation, encryption and
authentication technology, employee email, content delivery to customers, back-office support, and other functions. Some
subsidiaries had past security breaches, and, although they did not have a material adverse effect on our operating results, there
can be no assurance of a similar result in the future. Although we have developed systems and processes that are designed to
protect customer information and prevent data loss and other security breaches, including systems and processes designed to
reduce the impact of a security breach at a third-party vendor, such measures cannot provide absolute security.
We Face Risks Related to System Interruption and Lack of Redundancy

We experience occasional system interruptions and delays that make our websites and services unavailable or slow to
respond and prevent us from efficiently fulfilling orders or providing services to third parties, which may reduce our net sales
and the attractiveness of our products and services. If we are unable to continually add software and hardware, effectively
upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, it could cause
system interruptions or delays and adversely affect our operating results.
Our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss,
telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-
ins, and similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and
could prevent us from accepting and fulfilling customer orders and providing services, which could make our product and
service offerings less attractive and subject us to liability. Our systems are not fully redundant and our disaster recovery
planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses.
Any of these events could damage our reputation and be expensive to remedy.
We Face Significant Inventory Risk

In addition to risks described elsewhere in this Item 1A relating to fulfillment network and inventory optimization by us
and third parties, we are exposed to significant inventory risks that may adversely affect our operating results as a result of
seasonality, new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer
demand and consumer spending patterns, changes in consumer tastes with respect to our products, spoilage, and other factors.
We endeavor to accurately predict these trends and avoid overstocking or understocking products we manufacture and/or sell.
Demand for products, however, can change significantly between the time inventory or components are ordered and the date of
sale. In addition, when we begin selling or manufacturing a new product, it may be difficult to establish vendor relationships,
determine appropriate product or component selection, and accurately forecast demand. The acquisition of certain types of
inventory or components may require significant lead-time and prepayment and they may not be returnable. We carry a broad
selection and significant inventory levels of certain products, such as consumer electronics, and we may be unable to sell
products in sufficient quantities or during the relevant selling seasons. Any one of the inventory risk factors set forth above may
adversely affect our operating results.
We May Not Be Able to Adequately Protect Our Intellectual Property Rights or May Be Accused of Infringing
Intellectual Property Rights of Third Parties
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, and
similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade secret
protection, and confidentiality and/or license agreements with our employees, customers, and others to protect our proprietary
rights. Effective intellectual property protection may not be available in every country in which our products and services are
made available. We also may not be able to acquire or maintain appropriate domain names in all countries in which we do
business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We
may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of
our trademarks and other proprietary rights.
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties
that license our proprietary rights also may take actions that diminish the value of our proprietary rights or reputation. The
protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover,
the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from
infringing or misappropriating our proprietary rights. We also cannot be certain that others will not independently develop or
otherwise acquire equivalent or superior technology or other intellectual property rights.
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Other parties also may claim that we infringe their proprietary rights. We have been subject to, and expect to continue to
be subject to, claims and legal proceedings regarding alleged infringement by us of the intellectual property rights of third
parties. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial
resources, injunctions against us, or the payment of damages, including to satisfy indemnification obligations. We may need to
obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms
acceptable to us or at all. In addition, we may not be able to obtain or utilize on terms that are favorable to us, or at all, licenses
or other rights with respect to intellectual property we do not own. These risks have been amplified by the increase in third
parties whose sole or primary business is to assert such claims.
Our digital content offerings depend in part on effective digital rights management technology to control access to digital
content. If the digital rights management technology that we use is compromised or otherwise malfunctions, we could be
subject to claims, and content providers may be unwilling to include their content in our service.
We Have a Rapidly Evolving Business Model and Our Stock Price Is Highly Volatile
We have a rapidly evolving business model. The trading price of our common stock fluctuates significantly in response
to, among other risks, the risks described elsewhere in this Item 1A, as well as:
• changes in interest rates;
• conditions or trends in the Internet and the industry segments we operate in;
• quarterly variations in operating results;
• fluctuations in the stock market in general and market prices for Internet-related companies in particular;
• changes in financial estimates by us or securities analysts and recommendations by securities analysts;
• changes in our capital structure, including issuance of additional debt or equity to the public;
• changes in the valuation methodology of, or performance by, other e-commerce or technology companies; and
• transactions in our common stock by major investors and certain analyst reports, news, and speculation.
Volatility in our stock price could adversely affect our business and financing opportunities and force us to increase our
cash compensation to employees or grant larger stock awards than we have historically, which could hurt our operating results
or reduce the percentage ownership of our existing stockholders, or both.
Government Regulation Is Evolving and Unfavorable Changes Could Harm Our Business
We are subject to general business regulations and laws, as well as regulations and laws specifically governing the
Internet, e-commerce, electronic devices, and other services. Existing and future laws and regulations may impede our growth.
These regulations and laws may cover taxation, privacy, data protection, pricing, content, copyrights, distribution,
transportation, mobile communications, electronic device certification, electronic waste, energy consumption, environmental
regulation, electronic contracts and other communications, competition, consumer protection, employment, trade and
protectionist measures, web services, the provision of online payment services, information reporting requirements,
unencumbered Internet access to our services or access to our facilities, the design and operation of websites, health and
sanitation standards, the characteristics and quality of products and services, product labeling, and the commercial operation of
unmanned aircraft systems. It is not clear how existing laws governing issues such as property ownership, libel, and personal
privacy apply to the Internet, e-commerce, digital content, and web services. Jurisdictions may regulate consumer-to-consumer
online businesses, including certain aspects of our seller programs. Unfavorable regulations and laws could diminish the
demand for, or availability of, our products and services and increase our cost of doing business.
We Could Be Subject to Additional Sales Tax or Other Tax Liabilities

An increasing number of states and foreign jurisdictions have considered or adopted laws or administrative practices,
with or without notice, that impose new taxes on all or a portion of gross revenue or other similar amounts or impose additional
obligations on remote sellers and online marketplaces to collect transaction taxes such as sales, consumption, value added, or
similar taxes. Additionally, a June 2018 U.S. Supreme Court decision held that states can require remote sellers to collect state
and local sales taxes, which, given the scope of our operations, could increase the complexity and risks for us to comply with
such laws. We may not have sufficient lead time to build systems and processes to collect these taxes properly, or at all. Failure
to comply with such laws or administrative practices, or a successful assertion by such states or foreign jurisdictions requiring
us to collect taxes where we do not, could result in substantial tax liabilities, including for past sales, as well as penalties and
interest. In addition, if the tax authorities in jurisdictions where we are already subject to sales tax or other indirect tax
obligations were successfully to challenge our positions, our tax liability could increase substantially.
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We are also subject to U.S. (federal and state) and foreign laws, regulations, and administrative practices that require us
to collect information from our customers, vendors, merchants, and other third parties for tax reporting purposes and report
such information to various government agencies. The scope of such requirements continues to expand, requiring us to develop
and implement new compliance systems. Failure to comply with such laws and regulations could result in significant penalties.
We Could Be Subject to Additional Income Tax Liabilities

We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations,
and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to
economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and
accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate
tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as intercompany
transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where
we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, the applicability
of special tax regimes, losses incurred in jurisdictions for which we are not able to realize the related tax benefit, changes in
foreign currency exchange rates, entry into new businesses and geographies, changes to our existing businesses and operations,
acquisitions (including integrations) and investments and how they are financed, changes in our stock price, changes in our
deferred tax assets and liabilities and their valuation, and changes in the laws, regulations, administrative practices, principles,
and interpretations related to tax, accounting, and other areas, including European Union state aid rules. In addition, a number
of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, such as the recently enacted
U.S. tax reform legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Finally,
foreign governments may enact tax laws in response to the 2017 Tax Act that could result in further changes to global taxation
and materially affect our financial position and results of operations.
The 2017 Tax Act significantly changes how the U.S. taxes corporations. The 2017 Tax Act requires complex
computations to be performed that were not previously required in U.S. tax law, significant judgments to be made in
interpretation of the provisions of the 2017 Tax Act and significant estimates in calculations, and the preparation and analysis of
information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting
bodies could interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that
is different from our interpretation. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and
interpret any additional guidance, we may make adjustments to provisional amounts that we have recorded that may materially
impact our provision for income taxes in the period in which the adjustments are made.
We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax
liabilities against us. Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles,
and interpretations could have a material effect on our operating results or cash flows in the period or periods for which that
development occurs, as well as for prior and subsequent periods. Although we believe our tax estimates are reasonable, the
final outcome of tax audits, investigations, and any related litigation could be materially different from our historical income
tax provisions and accruals.
Our Supplier Relationships Subject Us to a Number of Risks

We have significant suppliers, including licensors, and in some cases, limited or single-sources of supply, that are
important to our sourcing, services, manufacturing, and any related ongoing servicing of merchandise and content. We do not
have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content, components, or
services, particular payment terms, or the extension of credit limits. If our current suppliers were to stop selling or licensing
merchandise, content, components, or services to us on acceptable terms, or delay delivery, including as a result of one or more
supplier bankruptcies due to poor economic conditions, as a result of natural disasters, or for other reasons, we may be unable
to procure alternatives from other suppliers in a timely and efficient manner and on acceptable terms, or at all. In addition, if
our suppliers or other vendors violate applicable laws, regulations, our code of standards and responsibilities, or implement
practices regarded as unethical, unsafe, or hazardous to the environment, it could damage our reputation, limit our growth, and
negatively affect our operating results.
We May Be Subject to Risks Related to Government Contracts and Related Procurement Regulations
Our contracts with U.S., as well as state, local, and foreign, government entities are subject to various procurement
regulations and other requirements relating to their formation, administration, and performance. We may be subject to audits
and investigations relating to our government contracts, and any violations could result in various civil and criminal penalties
and administrative sanctions, including termination of contract, refunding or suspending of payments, forfeiture of profits,
payment of fines, and suspension or debarment from future government business. In addition, such contracts may provide for
termination by the government at any time, without cause.
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We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We Sell or
Manufacture
Some of the products we sell or manufacture may expose us to product liability or food safety claims relating to personal
injury or illness, death, or environmental or property damage, and may require product recalls or other actions. Certain third
parties also sell products using our e-commerce services that may increase our exposure to product liability claims, such as if
these sellers do not have sufficient protection from such claims. Although we maintain liability insurance, we cannot be certain
that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on
economically reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us
from product liability.
We Are Subject to Payments-Related Risks

We accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional
financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment
upon delivery. For existing and future payment options we offer to our customers, we may become subject to additional
regulations and compliance requirements (including obligations to implement enhanced authentication processes that could
result in significant costs and reduce the ease of use of our payments products), as well as fraud. For certain payment methods,
including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs
and lower profitability. We rely on third parties to provide certain Amazon-branded payment methods and payment processing
services, including the processing of credit cards, debit cards, electronic checks, and promotional financing. In each case, it
could disrupt our business if these companies become unwilling or unable to provide these services to us. We also offer co-
branded credit card programs, which could adversely affect our operating results if terminated. We are also subject to payment
card association operating rules, including data security rules, certification requirements, and rules governing electronic funds
transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with
these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing
banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our
customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating
results could be adversely affected.
In addition, we provide regulated services in certain jurisdictions because we enable customers to keep account balances
with us and transfer money to third parties, and because we provide services to third parties to facilitate payments on their
behalf. In these jurisdictions, we may be subject to requirements for licensing, regulatory inspection, bonding and capital
maintenance, the use, handling, and segregation of transferred funds, consumer disclosures, and authentication. We are also
subject to or voluntarily comply with a number of other laws and regulations relating to payments, money laundering,
international money transfers, privacy and information security, and electronic fund transfers. If we were found to be in
violation of applicable laws or regulations, we could be subject to additional requirements and civil and criminal penalties, or
forced to cease providing certain services.
We Could Be Liable for Fraudulent or Unlawful Activities of Sellers

The law relating to the liability of providers of online payment services is currently unsettled. In addition, governmental
agencies could require changes in the way this business is conducted. Under our seller programs, we may be unable to prevent
sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the
products received are materially different from the sellers’ descriptions. Under our A2Z Guarantee, we reimburse buyers for
payments up to certain limits in these situations, and as our third-party seller sales grow, the cost of this program will increase
and could negatively affect our operating results. We also may be unable to prevent sellers on our sites or through other seller
sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights of others, and could
face civil or criminal liability for unlawful activities by our sellers.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Disclosure Pursuant to Section 13(r) of the Exchange Act

We determined that, between January 2012 and June 2018, we processed and delivered orders of consumer products for
certain individuals and entities located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act
(“ITRA”), in addition to those we have previously disclosed, as follows: consumer products valued at approximately $368,500
for individuals who may have been acting for 16 Iranian embassies and diplomatic organizations located in countries other than
Iran; consumer products valued at approximately $16,200 for individuals who may have been acting for six entities owned or
controlled by the Iranian government; consumer products valued at approximately $900 for three individuals who are
designated under Executive Order 13224; and consumer products valued at approximately $6,100 for individuals who may
have been acting for three individuals and entities designated under Executive Order 13224 or Executive Order 13882, two of
which are owned or controlled by the Iranian government. The consumer products included books, other media, apparel, home
and kitchen, jewelry, office, toys, health and beauty, consumer electronics, lawn and patio, automotive, musical instruments,
software, grocery, and pet products. We are unable to accurately calculate the net profit attributable to these transactions. We do
not plan to continue selling to these accounts in the future. Our review is ongoing and we are enhancing our processes designed
to identify transactions associated with individuals and entities covered by the ITRA.
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Item 6. Exhibits
Exhibit
Number Description
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2000).
3.2 Amended and Restated Bylaws of the Company (incorporated by reference to the Company’s Current Report
on Form 8-K, filed February 25, 2016).
10.1 Amended and Restated Credit Agreement, dated as of April 27, 2018, among Amazon.com, Inc., Bank of
America, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to the
Company’s Current Report on Form 8-K, filed April 27, 2018).
31.1 Certification of Jeffrey P. Bezos, Chairman and Chief Executive Officer of Amazon.com, Inc., pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2 Certification of Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of Amazon.com, Inc.,
pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1 Certification of Jeffrey P. Bezos, Chairman and Chief Executive Officer of Amazon.com, Inc., pursuant to 18
U.S.C. Section 1350.
32.2 Certification of Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of Amazon.com, Inc.,
pursuant to 18 U.S.C. Section 1350.
101 The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2018, formatted in XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated
Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated
Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including
detailed tags.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMAZON.COM, INC. (REGISTRANT)
By: /s/ Shelley L. Reynolds

Shelley L. Reynolds
Vice President, Worldwide Controller
(Principal Accounting Officer)
Dated: July 26, 2018

Exhibit 31.1
CERTIFICATIONS
I, Jeffrey P. Bezos, certify that:

1. I have reviewed this Form 10-Q of Amazon.com, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
/s/ Jeffrey P. Bezos

Jeffrey P. Bezos
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: July 26, 2018

Exhibit 31.2
CERTIFICATIONS
I, Brian T. Olsavsky, certify that:

1. I have reviewed this Form 10-Q of Amazon.com, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
/s/ Brian T. Olsavsky

Brian T. Olsavsky
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: July 26, 2018

Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350
In connection with the Quarterly Report of Amazon.com, Inc. (the “Company”) on Form 10-Q for the three months ended
June 30, 2018, as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I,
Jeffrey P. Bezos, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
A signed original of this written statement has been provided to the Company and will be retained by the Company and
furnished to the SEC or its staff upon request.
/s/ Jeffrey P. Bezos

Jeffrey P. Bezos
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: July 26, 2018

Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350
In connection with the Quarterly Report of Amazon.com, Inc. (the “Company”) on Form 10-Q for the three months ended
June 30, 2018, as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I,
Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
A signed original of this written statement has been provided to the Company and will be retained by the Company and
furnished to the SEC or its staff upon request.
/s/ Brian T. Olsavsky

Brian T. Olsavsky
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: July 26, 2018

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Table of Contents

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

Large accelerated filer Accelerated filer

PART II. OTHER INFORMATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Three Months Ended Six Months Ended Twelve Months Ended

Three Months Ended Six Months Ended

See accompanying notes to consolidated financial statements.

Three Months Ended Six Months Ended

See accompanying notes to consolidated financial statements.

December 31, 2017 June 30, 2018

See accompanying notes to consolidated financial statements.

Note 1 — ACCOUNTING POLICIES

Prior Period Reclassifications

Earnings per Share

Accounts Receivable, Net and Other

Accrued Expenses and Other

Accounting Pronouncements Recently Adopted

Accounting Pronouncements Not Yet Adopted

Note 2 — CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND MARKETABLE SECURITIES

December 31, 2017 June 30, 2018

Note 3 — COMMITMENTS AND CONTINGENCIES

2018 2019 2020 2021 2022 Thereafter Total

Note 4 — ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

December 31, 2017 June 30, 2018

Note 6 — STOCKHOLDERS’ EQUITY

2018 2019 2020 2021 2022 Thereafter Total

Note 7 — INCOME TAXES

Note 8 — SEGMENT INFORMATION

Critical Accounting Judgments

Recent Accounting Pronouncements

Liquidity and Capital Resources

Operating Income (Loss)

Technology and Content

General and Administrative

Other Operating Expense, Net

Interest Income and Expense

Other Income (Expense), Net

Non-GAAP Financial Measures

Free Cash Flow

Twelve Months Ended

Net cash provided by (used in) investing activities $ (13,173) $ (23,684)

Free Cash Flow Less Lease Principal Repayments

Net cash provided by (used in) investing activities $ (13,173) $ (23,684)

Net cash provided by (used in) investing activities $ (13,173) $ (23,684)

Effect of Foreign Exchange Rates

Exchange At Prior Exchange At Prior Exchange At Prior Exchange At Prior

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Foreign Exchange Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

We Face Intense Competition

Our International Operations Expose Us to a Number of Risks

The Seasonality of Our Business Places Increased Strain on Our Operations

• problems retaining key personnel;

We Have Foreign Exchange Risk

We Could Be Harmed by Data Loss or Other Security Breaches

We Face Risks Related to System Interruption and Lack of Redundancy